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International Consumers Condemn Dumping of Cotton & Other Subsidized Ag Crops

July 8 2004, Issue #358
Monitoring Corporate Agribusiness
>From a Public Interest Perspective

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CI STATEMENT TO THE 36TH WORLD CONGRESS OF THE INTERNATIONAL FEDERATION OF AGRICULTURAL PRODUCERS: Consumers International (CI) is grateful for the opportunity offered by the International Federation of Agricultural Producers to comment on IFAP's draft paper entitled "Legal and Institutional Aspects of Industrial Concentration in the Agrifood Sector", in particular the section "Consumer Organisations --- do they feel concerned?" CI submits this short paper in response and requests that IFAP’s paper be amended to take account of CI's concerns on dumping, market concentration and anti-competitive practices.

CI, as the voice of the world's consumer movement, has every reason to be concerned about the relationship between consumers and agricultural producers, as indicated in our recent comments in a CI submission to the OECD on the role of EU and US support regimes in agricultural dumping:

Agricultural dumping severely damages rural livelihoods in the global South with huge consumer welfare costs for vulnerable producers dependent on income for food and other essential goods and services in the global South. Producer and consumer interests are present in the same person in poorer countries with large agricultural sectors.

Artificially induced short-term price reductions can change consumption patterns and undermine local food production and economies, with subsidised exports reinforcing a tendency to supply urban areas from world markets rather from domestic rural production. This poses a risk to the future security of food supplies and may diminish consumer choice in the long run, again harming producer and consumer interests.

Taken as traditionally separate interests, of course, there may be genuine conflicts between the needs of consumers and producers, particularly over prices. Profit for farmers can be seen as simply net income, and as such no different from the operating profits of any other industry. Rather more significant, however, is the unreasonable profit which may derive from traders, processors or retailers benefiting from artificially low prices, subsidised by consumers through their prices and taxes.

Such "oligopoly rents" are an important issue, and are not to be confused with normal operating profit. In such circumstances there may a commonality of interest between consumers’ lack of market power and that of small producers who benefit unequally from current agricultural policies and trade in comparison
with other interest groups involved in agricultural production, marketing, processing and retailing.

Agricultural support, market concentration and competition Indeed, CI’s agriculture and competition research in various countries around the globe indicates that as far as subsidised cheap imports are concerned, local or regional cartels are likely to capture the alleged benefits to consumers.

CI has evidence of such anti-competitive practices in countries as different as Ecuador and Poland, which saw spectacular declines in farm gate prices at the same time as spectacular increases in food prices, in spite of the huge influx of EU surpluses.

The consumer interest is for secure food supplies at predictable prices, not the lowest possible but volatile prices.

Greater information and analysis are needed on the interrelationship between agricultural subsidies and market concentration and anti-competitive practices in agricultural trade and the global food supply chain. A number of studies already exist, however, showing that OECD agricultural support policies not only entail major costs for consumers, who pay higher prices and taxes (not to mention the moral costs of dumping on Southern markets), but are also highly regressive in their support for agricultural production in the OECD countries themselves. Instead of benefiting small farmers, the provision of agricultural support overwhelmingly favours large-scale, capital-intensive agricultural businesses, and has led to the concentration of farm and land ownership.

According to the Trans Atlantic Consumer Dialogue (TACD), moreover, industrial country subsidies are the symptom of a wider problem: "The cause is an agribusiness-driven system in which structurally depressed prices for agricultural commodities benefit neither farmers nor consumers."

CI is not unaware of the difficulties facing small agricultural producers both in the industrial countries but particularly in the global South.

Southern governments, often as part of the conditions of IMF and World Bank adjustment programmes, have abandoned mechanisms for agricultural support and state intervention, despite the global imbalances in agricultural market liberalisation. The withdrawal of credit, input, marketing and technical support for small producers has hindered their ability to respond effectively to domestic and external market opportunities, and, the frequent absence of effective competition regulation has meant that benefits have not necessarily been passed to consumers.

Smaller producers, generally, while often efficient and responsive, are often at a disadvantage in bargaining with the buying and selling power of large national and foreign processing firms and retailers dominating domestic and foreign markets.

A global supermarket sector now exists with 30 companies accounting for one third of grocery sales, and supermarket chains are rapidly penetrating the markets and middle- and even lower-income countries.

The consumer implications of the apparent trend towards growing concentration in agrifood markets merit further detailed study, both in terms of the relationship between the welfare of rural and urban consumers in the developing and transition economies and in terms of the links with the interests and responsibilities of consumers in OECD countries.

CI, therefore, is indeed concerned by concentration in agrifood markets and would welcome the opportunity to explore with relevant farmer and other stakeholder groups how and to what extent producers and consumers have common interests in seeing this issue addressed in agricultural reforms and wider efforts to deal with the role of anti-competitive practices in agricultural dumping.

CI proposes that the following steps should be pursued:

* Support should be provided for the development and application of competition regulation at the national level.

* Relevant bodies such as the OECD and the WTO, in collaboration with specialised UN agencies such as Unctad and the FAO, should gather information on and analyse the nature and scale of concentration and anti-competitive practices in agrifood markets and trade.

* WTO members should issue a statement agreeing to ban agricultural dumping in all its forms and launch the necessary technical work this would involve.

* The OECD, with the formal and transparent participation of interested parties, should develop a methodology for calculating dumping margins based on full cost-of-production figures for an agreed list of commodities.

* Farmers, consumers and other civil society interest groups with a stake in the issues should study, wherever possible in collaboration, the effects of agribusiness market concentration in inputs, marketing, processing and retailing, with a view to developing effective proposals for reform.

To ensure immediate progress on agricultural dumping within the current focus of WTO talks, farmers and consumers organizations should support a review of the Agreement on Agriculture green box (as well as elimination of the blue and amber boxes). This will involve the timetabled development and application of criteria to ensure that support for legitimate agricultural public policy goals can be distinguished from forms of support that should be subject to multilateral dumping disciplines.