In Agricultural Trade Talks, First Do No Harm

Issues in Science and Technology, Fall 2005 by Polaski, Sandra

Trade advocates often point to the utility of trade-opening as a mechanism to drive forward the process of shifting labor and capital from less productive to more productive uses. However, historical evidence suggests that without complementary policies, trade alone is unlikely to foster the absorption of large agricultural workforces into more productive sectors. Countries that have experienced successful long-term development at tolerable transitional human costs have been those that were able to grow fast enough in other sectors to gradually absorb excess agricultural labor. This occurred in Japan and Korea and is now underway in China. When rural-to-urban migration has been driven primarily by worsening poverty in rural areas, the result has been increasing rural poverty and the growth of lowproductivity informal sectors in urban areas. This pattern has been observed in many developing countries, such as Mexico.

Forcing poor farmers to compete with global agriculture will not hasten an increase in their productivity if they do not have sufficient land as well as access to credit, high-yield seed, water, technical assistance, and other necessary inputs. Also needed are adequate roads and other infrastructure to allow small farmers to get their products to market and government policies on taxation, tariffs, and health and educational services that do not discriminate against small farmers and rural areas. Cutting farm tariffs without these complementary measures will deepen, not alleviate, rural poverty.

If trade displaces subsistence farmers, will they find work elsewhere? Manufacturing, which traditionally has provided jobs for low-skilled farmers as countries modernized, currently faces a glut of capacity and labor supply at the global level, especially in labor-intensive low-skill manufacturing. In sectors such as textiles, apparel, toys, furniture, and simple electronics, the integration of the Chinese labor force into the global production system during the past decade has attracted additional investment in production facilities there, while global demand for these goods has not grown at a commensurate pace. The result has been intense competition among developing countries for available orders and generally falling prices. In the case of textiles and apparel, the end of a global quota system in 2005 has ushered in a period in which most developing countries will see their share of global markets for those goods shrink as China and a few other countries dominate the market.

In the service sector, employment opportunities created by liberalized trade are typically out of reach for poor farmers because of education, health, and mobility constraints that poor rural households commonly face. In India, for example, the dramatic increases in service-sector industries and jobs have improved prospects for some urban dwellers, mainly those with higher education, but have had virtually no impact on rural poverty and unemployment.

Poor farmers who are displaced will find alternative incomes out of necessity, because most developing countries have no unemployment schemes or other social safety nets. However, history shows that most will be forced to accept low-productivity work in the informal sector or to emigrate.