1. AGRICULTURE IN A GLOBALIZED WORLD ECONOMY OR THE CORPORATE FOOD REGIME Alexandra Strickner Institute for Agriculture and Trade Policy, Vienna www.iatp.orgwww.iatp.org; www.tradeobservatory.orgwww.tradeobservatory.org astrickner@iatp.org

2. OVERVIEW 1. Agriculture today – structures, actors, trends 2. Agriculture and Trade 3.Consequences of these trends 4. Alternatives

3. 1.Agriculture today: structures, actors, trends Changes in agricultural production during the past decades Establishment of a Corporte Food Regime Data on market concentration

4. Historic Trends -Industrialization and mechanization of production -Enormous market concentration along the whole food chain -From subsistence and/or agriculture for domestic market to export-oriented agriculture

5. The Corporate Food Regime Establishment of an industrialized, corporate controlled agriculture Control of food production by few Transnational Corporations – from seeds to supermarkets Privatization of resources (land, water) and of knowledge (seeds, patents)

6. The Corporate Food Regime Development of vertically integrated food corporations and transnational value chains – e.g. Cargill Development of so called oligonomies – market is controlled by few buyers and sellers who are the same – e.g. Nestle

7. Data on market concentration – seeds, fertilizers 70% of corn and 90% cotton seeds controlled by –Pioneer (USA)- Monsanto (USA) –Syngenta (CH) and - Groupe Limagrain (France) Monsanto: controls 90% of commercial GMO sales 1995 – 1998: 68 seeds companies in US bought by transnational companies active in Pharma/Chemistry Development of Life Science conglomerates - Syngenta (CH) Nr. 1

8. Concentration trends in agricultural production Less farmers, bigger farms Contracting as trend – farmer is producing for TNC (e.g. chicken production) TNCs – direct control of production e.g. via Joint ventures Farmers as producers of agricultural commodities

9. Concentration - production The case of Archer Daniels Midland (ADM) Joint Venture with Growmark and Countrymark – Producer Cooperatives: access to 50% of US & 75% of Canadian market for corn and soybeans Joint Venture with EU cooperatives (A.C. Toepfer/Germany – little data available) – Control of access to Eastern European market. 1993 45% of processed food imports into Eastern Europe came from ADM

10. Vertically integrated companies and Joint Ventures: expl. Novartis/Archer Daniels Midland (ADM) Novartis: Market leader – chemical products in agriculture sector (1997: 4 Mrd. USS Sales, approx. 15% of World market) ADM: US company active in food processing, trade of grains, meat production –Food processing units in: US, China, Eastern Europe, Mexico Novartis/ADM Link: Joint Ventures with same companies – Novartis obtains greater access/control of markets

11. Market concentration – Food Processing Top Companies: Nestle, Philip Morris, ConAgra, Cargill, Unilever, Coca Cola, Pepsi Cola Three biggest: yearly sales of approx 100Mrd. US$ 50 Top companies get 20% of food expenditure EU – 15 : Food processing sector one of largest industrial sectors - 13% of total industrial production, 11% employees 0,7% of all EU Companies in sector produce 50% of products! Trend: processed food, functional food

12. Consumers Retailers 30 Companies, 33% of world market Roasters3 Companies 45% of world market Internat. Traders4 Companies ~ 35% of w. m. Local Traders Producers25 million farmers & Workers Market Concentration Trade – The Case of Coffee Source: Vorley B (2003). IIED/UK Food Group

13. Market concentration – Retailing Sector 6 TNCs will soon control retailing world wide Important TNCs: Wal Mart, Carrefour, Metro, Safeway etc. Wal Mart: 4300 shops in 9 countries, Price reduction: 13% in 10 years Carrefour: biggest Supermarket in F, Sp, B, Port., Brazil, Argentina, Tawain, Indonesia

14. Development of retailing sector in Europe – share of biggest 10 retailers until 2010 according to sales (from 337 Billion Euro to 670 Billion Euro)

15. Consumers: 160,000,000 Customers: 89,000,000 Outlets: 170,000 Supermarket formats: 600 Buying desks: 110 Manufacturers: 8,600 Semi-manufacturers: 80,000 Suppliers: 160,000 Farmers/producers: 3,200,000 The Supply Chain ‘Bottleneck’ in Europe Covers retail food (not foodservice) and represents about 85% of the total sales of the western European countries. Source: Grievink (2003 )

16. 2. Agriculture and Trade Trade in Agriculture and Development – what trends and experiences? Negotiations to liberalize agriculture trade EU Common Agriculture Policy and trade liberalization – winners and losers

17. Trade in Agriculture and Development?

18. What results of agriculture trade liberalization? More Exports, less foreign exchange income Thailand : 1997 – 2002 Agriculture Exports in volume: increase of 49% Value of exports: decrease of 42% 1997: 10.552 Mio USS 2002: 9.997 Mio USS Only 24% to farmers Agriculture trade balance of developing countries between 1970 and 2001(accord. to FAO) –From + 1 Billion USD to – 11 Billion USD –2030: Minus of more than 30 Billion USD expected! –Most developing countries: Net Food Importers, NOT EXPORTERS

19. Trade in Agriculture and Development? Decline of commodity prices as a result of agriculture and trade liberalization

20. Trade in Agriculture and Development?

21. Negotiations to liberalize agriculture trade Despite negative results of agriculture liberalization – most governments support further agriculture liberalization Argument: Increased trade leads to development Problem analysis: trade distortions caused by government policies avoid development –Main trade distortions: tariffs, export subsidies, domestic support, state trading enterprises etc. –Main distorters: US and EU

22. Negotiations to liberalize agriculture trade Arenas of negotiation WTO – Agreement on Agriculture (tariffs, export subsidies, domestic support) –But also TRIPS (patents) and GATS (water, retailing…) Bilateral & regional trade negotiations – tariffs, non tariff barriers –US: NAFTA, CAFTA, US-Korea FTA etc. –EU: EPAs (Africa), FTAs with Chile, Mexico, EU- Mercosur, EU – Central America, EU - ASEAN

23. Negotiations to liberalize agriculture trade Key Proponents Country level: –Agro-exporters: US, EU, Canada, Australia, New Zealand, Brazil, Argentina, Thailand etc. –Aim: Ensuring market access Stakeholders: –Transnational Corporations: Cargill, ADM, Nestle, Danone, Carrefour, Wal Mart etc... –Aim: Producing food, trading food with as little barriers/costs as necessary at global scale

24. Negotiations to liberalize agriculture trade OBJECTIVE OF TRADE LIBERALIZATION -Development of a global market in agriculture -NOT solution of existing problems in agriculture trade (low commodity prices, dumping, food security etc.) -NOT creation of conditions for development WINNERS –Transnational Corporations along the food value chain –Few big farmers – economies of scale –Consumers in Developed countries (see also Carnegie Study) LOSERS –Most farmers in South and North –Consumers in South, but also North –Environment (Loss of Biodiversity, Degradation of soils, increased water problems)

25. European Common Agriculture Policy Key elements of reform 2003 –From Price Support to Direct Income –Elimination of Export Subsidies until 2013 –Lowering of Intervention Price to come closer to World market price – allows for tariff reductions

26. The direct payments game (MacSharry reform  Agenda 2000  Mid-term review) World market Internal EU market World price EU price Intervention price Import tariffExport subsidy

27. The direct payments game (MacSharry reform  Agenda 2000  Mid-term review) Direct payments World market Internal EU market World price EU price Intervention priceImport tariffExport subsidy

28. European Common Agriculture Policy Who benefits? –Food processing TNCs – lower commodity prices internally –Few big farmers – economies of scale Who loses? –Small/Family Farmers – Intervention prices & direct support to low to survive –Further concentration and industrialization of production –People in EU: paying 3 times (Food, Direct payments via their taxes, environmental costs of production system) –Farmers/People in the South: Continuation of dumping with this model

29. 3. CONSEQUENCES OF THESE TRENDS A handful of TNCs decides on food production - main interest: maximizing profit! Less healthy food, increase of processed food, functional food – Health Impacts (e.g. Obesity) Monoculture in food consumption: Food comes from “No where” – Coke und Pizza everywhere Social catastrophy in Developing countries – loss of livelihoods, increased waged labor in agriculture sector, decrease of food security, no job alternatives (see other liberalization processes) Ecological catastrophy – loss of biodiversity, monocultures, degradation of soils, water scarcity New issue: Agrofuels – competition food, feed, fuel

30. 4. Alternatives The Concept of Food Sovereignty Definition: Right to food and right to produce food Right of peoples, communities and countries to decide on their agriculture, fishery and food policies Policies should recognize and maintain unique ecological, social, economic and cultural conditions of a country/region

31. 4. Alternatives The Concept of Food Sovereignty Principles of the concept: Support production of healthy, high quality, locally produced food Food production for local markets versus “Export at all costs” Protection of workers in food sector (trade union rights, Support of standards etc.) Laws to limit market concentration Trade rules complementary and supportive to realize food sovereignty (tariffs, import controls, commodity agreements)

32. 4. Alternatives – Challenges for CSOs Agriculture and trade policies affect us all – it is about food – expose developments and trends Build spaces/networks/new alliances among different groups to discuss current developments – local, national, European and international level –Farmers, Food Workers, Environmental Groups, Consumer Groups, Health Groups, Fair Trade, Developmental Groups, Climate Change Groups etc. CAP Review Process as political dynamic to build European dynamic Local Food Economies and Policy Alternatives

33. THANK YOU Institute for Agriculture and Trade Policy www.tradeobservatory.org www.iatp.org astrickner@iatp.org