Francisco G. Pascual and Arze G. Glipo*

Seven years under the GATT-WTO rule, yet Philippine agriculture has not shown any signs of the promised remarkable growth under a liberalized trading regime. The purported gains in trade and employment in the post-GATT era are nowhere to be felt. Agricultural imports have outpaced exports, with the country ending as a net food importer at the end of 2000. Traditional export crops like coconut, abaca and sugar have been losing markets over the years contrary to the promised expanded market access under the WTO regime. Indeed such a dismal picture does not bode well for a country where more than 50% of the population depend upon agriculture for their subsistence and, indeed, to the economy as a whole where agriculture contributes 20 percent of the GDP.

What happened along the way? Where have all the promised benefits of job creation, better commodity prices and increased revenues from exports gone?

This paper aims to provide answers to these questions and provide an in-depth look into the state of Philippine agriculture seven years after the Philippines ratified the GATT-UR. It will show that contrary to the arguments laid down by the Philippine government, our membership in the WTO has only imperiled the country's food security, destroyed the livelihood of small farmers and agricultural workers and exacerbated long-running social inequities. It shall look into the internal structure of Philippine agriculture as well as the nature and operations of the international trading regime under the rules of the WTO to provide a fuller understanding on why Philippine agriculture has remained on the losing end. It shall endeavor to put forward policy recommendations for enhancing food security, raising incomes of poor peasants and ensuring equitable development of agriculture.

This assessment comes at no more than an opportune time these days when member countries of WTO have decided to launch a new round and within this are undertaking the second phase of the review of the implementation of the agriculture agreement. While some of the statements of the Philippine negotiating panel in the WTO point to an increasing bias for food security and development concerns, much remains to be desired in reforming government policies that have allowed the full-steam liberalization of the agriculture sector at the expense of the vast majority of the country's agricultural producers. This paper will try to offer a range of policy options that could move our agriculture forward from the doldrums.

Agriculture is one of the most contentious issues in the Uruguay Round of negotiation of the GATT that began in 1986 and ended only in 1994. The controversy lies in the fact that agriculture has hitherto been outside of the GATT which covered only trade in the industrial sector. The supposed objective of the agriculture agreement is to establish "a fair and market-oriented trading system" in agriculture by eliminating so-called "trade barriers and trade-distorting support in agriculture." The rules by which a more "level playing field" in the world’s agricultural trading system can be achieved are outlined in the main provisions of the agreement: on market access, domestic support and export subsidies. The area on market access calls for the tariffication of all non-tariff barriers and the progressive reduction of tariffs over the years. The provisions on domestic support and export competition require member states to reduce agriculture subsidies that distort trade. Implementation of the agreement for developed countries is until the end of 2000, while that of developing countries will be by 2004. Table 1 shows the specific rules for each provision.

However, beyond the rhetoric of leveling the playing field for trade in agriculture, the AOA is basically a highly iniquitous agreement skewed in favor of the interests of developed countries. While it offers special and differential (S&D) treatment to developing countries such as in the form of longer implementation periods, it provides far better concessions to developed countries through the green and blue boxes, which are categories of exemptions under the subsidy reduction rule. These kinds of subsidy are allowed if they are intended to meet social or environmental objectives. More often than not, these boxes are used to replace the lost production support and export subsidies of developed countries subjected to reduction under the WTO regime. The net effect is that agricultural trading systems in developed countries remained highly subsidized and protected, while those of developing countries were rapidly pried open and subjected to the dumping of cheap imported goods. Developing countries with very minimal public expenditures in agriculture as they are already saddled by chronic budget deficits and increasing debt burdens ironically could not even make use of these exemptions. The AOA by design legitimizes and strengthens the trade-distorting practices of developed countries.

Another provision in the AOA that is of more of use to developed countries than the developing countries is the Due Restraint Clause of Article 13 which protects various subsidies, such as those falling under the green and blue boxes. Export subsidies and the input and investment subsidies are allowed for developing countries under the S&D treatment supports and could not be challenged until 2003. The WTO member states would have to decide if this clause would be binding beyond 2003.

The Special Safeguard provision contained in Article 5 of the Agreement is another tool by which developed countries could manipulate their way around tariffication of imported commodities. This allows countries the right to impose additional tariffs to protect local products from sudden import surges or fall in world prices. The safeguard tariffs are however good only for one year and should not exceed 1/3 of the commodity’s normal tariff rates. Commitment schedules made by member states show that mostly developed countries availed of this provision and only 21 developing countries were eligible to use this option. (Murphy, 2001).

Negotiations on the AOA are mandated to take place under Article 20 a year before the end of the implementation period for the developed countries, i.e beginning of year 2000. The objective of such negotiations is to complete the process of reforms in global agricultural trade until a "fair and market-oriented agricultural trading system is established that will prevent and correct restrictions and distortions in world agricultural markets."

The implementation of the scheduled commitments of member countries under AOA has clearly exposed the inherent imbalances and anomalies in the agreement. Developing countries that rapidly tariffied their quantitative import restrictions and reduced tariffs at scales more than what have been stipulated in the agreement in the hope of increasing market access for their products have ironically found their prime exports stagnating over the past few years. Markets in developed countries especially for agriculture and textiles remained heavily protected. Of the 38% of global imports accounted for by the EU in 1999, 2/3 of this came from trade between EU member states themselves. (Murphy, 2001). Prices of agricultural commodities in the world market instead of rising are falling, contrasting sharply with the anticipated gains of increased foreign exchange earnings from competitive exports of developing countries. This results in decreasing agricultural export revenues for developing countries. In fact their share of agricultural exports to total world agricultural exports has been declining over time from 40% in 1961 to 27% in 1990. (Binswanger, 2000).

The falling world prices of agricultural commodities stems from the overproduction of these commodities, the development of substitutes as well as the massive domestic support and export subsidies employed by the governments of the developed economies. The AOA rules for substantial reduction of subsidies have been circumvented and rendered ineffectual as government expenditures on agriculture in developed countries remain high. While AMS spending in the US and EU was lowered, the Green Box expenditures inversely increased. The total agricultural support in OECD countries has reached $360B in 1999 up by 28% from $280 B in 1997. The EU, JAPAN and US account for 90% of these subsidies. In the US alone, domestic support to agriculture has risen to US$28B in 2000.

The increasing subsidies reflect the wholesale violation of the avowed intent if not the letter of the agreement, which aimed to reduce subsidies and reign in the destructive competition between the EU and the US in agricultural trade.

The dumping of heavily subsidized products from the North in the world market are now wreaking havoc on the livelihoods of farmers in the developing countries. More threateningly, the AOA has turned many developing countries into net food importers in just a short span of time. Food security and rural development are two areas of concern in developing countries that are now being undermined by the increasingly liberalized trade regime under the WTO-AOA.

The AOA has helped in no uncertain terms the expansion of MNC control in the global trade in agriculture. The main beneficiaries of expanded market access and increasing agricultural subsidies in the north are not even the family based farmers in Europe or in the US. It is the multinational agribusiness corporations who control the trading, input supply, processing and marketing in agriculture not only in their own countries but at the global level that benefit immensely. Indeed, under the globalized trading regime of the WTO, the TNCs were able to tremendously expand their operations. In a recent survey of WIR, data shows that foreign direct investments (FDI) flow into developed countries expanded from $481 B in 1998 to $636B in 1999 and FDIs to developing countries increased from $179 B in 1998 to $208 B in 1999. TNCs have more economic clout than governments. Consider some facts: Mitsubishi’s trade volume is greater than the GNP of Indonesia, Ford’s trade is more than that of South Africa and Royal Dutch Shell’s income is more than Norway’s. (Capdevila, 2001).

Their dominance in global economy and trade enable TNCs to dictate the agenda for negotiations in the WTO through their governments. In fact, they have more clout in the UR negotiations than most developing country GATT members. To influence their governments, they formed active lobby groups such as the Intellectual Property Coalition whose members are leading American agro-chemical conglomerates like Dupont, Monsanto and Pfizer. (Rocamora, 1996).

A growing trend in global agribusiness operation is the consolidation of TNCs vertically and horizontally which further expands their control over economies of developing countries whose agriculture comprise about 25-35 percent of their GDPs. This phenomenon of increasing TNC control of global agriculture also dispossesses Third world farmers of their control not only of their lands but also of seeds and genetic resources vital to ensuring sustainable food production systems in the South. An example of this integration is the joint venture of Cargill and Monsanto to develop genetically engineered foods. (Murphy, 2001).

The Philippine government's formal accession to the GATT-WTO was made possible by the ratification of the Philippine Senate of the GATT-UR in December 1994. Along with it, the government's commitments to the various agreements embodied in the Uruguay Round including the Agreement on Agriculture were made legally binding. To pursue the full completion of its commitments to the AOA, the government has subsequently amended and revised existing laws and policy measures that were not in congruence with the rules of the WTO.

Thus, RA 8178 known as "An Act Replacing Quantitative Import Restrictions on Agricultural Products, Except Rice, with Tariffs Creating the Agricultural Competitiveness Enhancement Fund, and for Other Purposes" was enacted under the then Ramos administration. This repealed the Magna Carta of Small Farmers of 1991, which protected products of small farmers and replaced all quantitative restrictions on agricultural imports with tariffs. Under its tariffication program, tariff rates are substantially reduced over ten years without regard to its effects on local agricultural producers. The tariff rates imposed on agricultural products which were previously protected under the Magna Carta Law, are virtually minimal, ranging from 30%-50% considering that these are the country’s major produce and provide livelihood to majority of the Filipino farmers. See Table 2, Tariff Rates for Sensitive Agricultural Products, 1995-2000. In other developing countries, 300% tariff rates were imposed on highly sensitive products. Applying for exemption of rice under the AOA's Special Treatment Clause, government was able to postpone the tariffication of rice until 2005. However, a minimum access volume (MAV) for rice imports placed at 1% of total consumption (base year 1986-1988) in 1995 increasing to 4% of consumption in the year 2005 was allowed. Other sensitive crops, which have not been previously imported were also placed under MAV schedules. See Table 3. Imports under MAV are slapped with below normal tariff rates while quantities exceeding are levied with normal rates, which are higher.

Under the AOA, the government is not required to reduce its domestic support to agriculture as its current levels of subsidies fall below the minimum of 10% of the value of production. According to data from the Department of Trade and Industry, government market price support for rice and corn in 1996 was only 5% and 1% respectively of the total value of production. (Bernardino, 2000).

Side by side with rapid tariff reforms, the government came out with a much-trumpeted safety net plan called the DA Action Plan in 1994, supposedly to minimize dislocation of livelihood of farmers and make them competitive in preparation for entering the global market. The plan, exhibiting the optimism of pro-GATT proponents at that time allocated P27B for the improvement of irrigation facilities, P8B for the construction of farm-to-market roads, P762M for the improvement of postharvest facilities and P64 M for the installation of grain centers. Seven years after, the plan remained a grandiose dream. According to DA, only 50% of the budgetary requirement of the plan was met.

In 1998, with the executive safety net program tottering on the brink of collapse, the government came out with a legislative measure that pursued the same goals of building the global competitiveness of Philippine agriculture. This time, the Agriculture and Fisheries Modernization Act (AFMA) was passed by Congress, which provided for government support in irrigation, post-harvest facilities, credit and financing, information and marketing assistance, product standardization and consumer safety, research and development, etc. It also provided for the identification of Strategic Agricultural and Fisheries Development Zones (SAFDZs), which were no better than the Ramos' Key Production Areas (KPAs), a locus for high value crop production. The AFMA was allocated a budget that is distinct from the normal operational budget of the Department of Agriculture. But despite having a legislated annual budgetary allocation, AFMA was not able to take off the ground as government could not even meet the annual budgetary needs of the DA.

Partly to ensure favorable public opinion leading to the ratification of the UR-GATT in 1994, government came out with a very optimistic computation of the benefits that could be derived from the country's entering into the agreement.

• Increase in annual agricultural export earnings by at least PhPesos 3.4 B.
• Increase in the annual gross value added of agriculture by PhP 60B.
• Creation of an additional 500,000 jobs annually.

Hence, in the heat of the debate between the pro and anti WTO, government armed with these arguments easily branded the opposition as anti-development and anti-poor claiming further that the latter refused to see the tremendous economic and social benefits that free trade could offer to the country's poor.

By 2000 as the country reeled from one crisis to another, and the rosy predictions were blurred by grimmer economic realities, the free traders could merely offer lame excuses as to why the promised benefits remained unfulfilled.

In the period from 1995-2000, the performance of the agriculture sector, which employs about half of the country's labor force remained lackluster. The total output of agriculture as measured by its real gross-value added has minimally increased. For the past six years, the average growth rate of the agriculture GVA was a mere 1.38% lower than the average rate of 1.62% in the years 1991-1994. The decline in GVAs mirrors declining output of agriculture and hence its capacity to supply the food needs of the population as well as its ability to generate employment not to mention compete in the world market.

The crop subsector which accounts for 50%-60% of agriculture’s GVA has performed poorly. Rice production increased in the early years of the AOA but soon suffered significant declines in recent years (through 1997 to 1998), dipping to a negative 24.1% in 1998. The same is true for corn production which posted negative growth rates in the years 1995, 1998, and 2000. See Table 4. The coconut subsector has likewise consistently posted declining production growth in the years following the GATT ratification. DA officials blamed the weather disturbances in 1998 for the over-all decline in crop production for that year. However, the sluggish performance across sectors over the years in the post-GATT period would point to policy issues as the more significant factors.

The prices of specific agricultural commodities like sugar, coconut oil, rice and corn during the pre and post-GATT periods showed no remarkable changes. The relative prices of these products in fact have been on the decline since the 70's. This downward trend in agricultural prices was attributed partly to insufficient agricultural support and investments, decreasing hectarage devoted to agriculture and stagnant per capita agricultural output (Lim, 1996). The importation of relatively cheaper agricultural products, notwithstanding the flooding of local markets with smuggled goods in the recent years further pushed down domestic prices particularly of rice and corn. The prices of coconut-based products such as copra and coconut oil have been likewise on the downtrend because of the emergence of supposedly healthier and cheaper substitutes such as soybean oil and palm oil. See Table 7. The sanitary and phyto-sanitary measures under the WTO further strengthened the "health standards" imposed on Philippine exports like coconut bringing down their volume and world market price. Table 5 shows an almost 50% decline in the price of coconut oil in the year 1999-2000. The prices of corn and coffee also took a nosedive in the year 2000. See Table 6.

Over-all the downward trend of commodity prices, in real terms for the past two decades has been attributed to several factors -- devaluation of the local currencies of the countries of the South, a glut in the market, development of substitute etc. This has resulted to deteriorating terms-of-trade for most developing countries dependent on commodity exports and subsequent huge trade losses. But despite the depressed prices in the 80's, the volume of commodity exports from developing countries has in fact risen by over 40% from 1980 to 1990. The tendency for developing countries dependent on agricultural exports for foreign exchange earnings is to double or triple the volume of their exports in order to offset the declining value.

Hence, owing to low demand and depressed prices of agricultural commodities in the world market, Philippine agricultural exports have not boomed as promised by the pro-WTO proponents. Contrary to expectations, the value of agricultural exports has not significantly risen in the past six years. See Figure 1. value of Agricultural Exports 1994-2000. It declined 25% from 1997-1999. This partly explains the fact that the share of agricultural exports in the economy's total merchandise exports decreased substantially from 20.8% in 1990 to a mere 4.9% in 1999. Export earnings specifically from food and live animals have been decreasing from 1996-1998. Crude coconut oil, which is the 4th top merchandise export of the country has posted significant declines for the past three years, from P14 million export earnings in 1998 to a mere P4.6 million in 1999 and partially recovering to P10.5 million in 2000 at constant prices. (Source: Economic and Social Statistics Office, NSCB 2001). Table 8 shows the declining value of leading agricultural commodity exports in the country in the post-GATT era.

Despite declining competitiveness of the country's traditional export crops in the world market, government continues to blindly promote export crop production. Increasing support is being given to the production of non-traditional exports like asparagus, mangoes, pineapple and banana, where according to government technocrats lie our "comparative advantage." The impetus for high value crops production has its roots in the export-oriented industrialization strategy adopted by the then Marcos dictator in the 70's to transform the Philippine economy into an exporter of semi-processed goods. This gave rise to the flourishing of the banana and pineapple industries in Mindanao under the control and ownership of transnational corporations. By the 80's under the IMF-WB sponsored Structural Adjustment Program, the export-oriented agricultural production policy continued as the country’s economy was further integrated into the international market, agriculture deregulated and trade liberalized. High value crop production took center stage in agricultural policy under the Ramos Medium-Term Agricultural Development Program (MTADP) in the 90s. As the country was fully integrated into the global economy under the aegis of the WTO, the AFMA and subsequently Estrada's Agrikulturang MAKAMASA again placed the highest priority to the development of high value crop production. Hence, areas planted to pineapple have doubled in less than ten years, from 61,000 hectares in 1989 to 102,000 hectares in 1996. Banana plantations expanded by 40,000 hectares in the last seven years. (Cainglet, 2001). The area devoted to cutflower production has grown from 1,008 hectares in 1990 to 1,427 hectares in 1996. Moreover, rice and corn lands in Mindanao have been reduced by 63.56% and 46.67%, respectively, to give way to high value crops (Aquino, Jr., 1998).

The post-WTO period saw record increases in the volume of imported agricultural products as even previously banned products were liberalized. Under the WTO-AOA importation of agricultural products should be fully liberalized, with markets for sensitive products opened through the minimum access provision. This caused heavy surges of imported products like rice, corn, wheat, poultry, livestock and vegetables. The postponement of the liberalization of rice to 2004 under the Special Treatment Clause of the WTO-AOA did not deter its heavy importation. In 1998, rice became the top imported agricultural product with a value of $585 M which comprise 35% of the total value of agricultural imports (IBON, 2000). The high volumes of imported rice in the post-GATT period exceeded the committed quantities of minimum access of the government, which is 29,900 mt for 1995, increasing to 224,000 mt by 2004. This trend poses serious threats to the country’s ability to produce rice for its population’s consumption. See Table 9.

Source: Supply and Utilization Accounts
Bureau of Agricultural Statistics

Importation of cereals and cereal preparation increased significantly from $843 M in 1996 to $981M in 1998. The same is true for milk, poultry, beef, onion, garlic, and vegetable oils. See Tables 10-12. Faced with cheaper prices of their imported counterparts or substitutes, local agricultural products further suffered from declining prices.

It was not surprising to see the country’s agricultural trade deficit ballooning in a span of six years. From a net agricultural exporter in the 70’s and 80’s, the Philippines became a net food importer by the late 90’s. Agricultural trade deficits posted the highest after the ratification of the GATT in 1994. See Table 13. This further contributed to draining the country’s scarce foreign exchange reserves and eroding the country’s food self-sufficiency.

The promise of millions of jobs to be created in the post-GATT era, sad to say, did not materialize either. On the contrary, as a result of the fuller integration of Philippine agriculture into the international market, livelihoods of millions of poor peasants were actually threatened. Rice and corn farmers who now face stiffer competition from cheaper imports have experienced declines in their incomes. Corn farmers in the south have even abandoned their farms as farmgate prices of corn continue to plummet. The same is true for coconut farmers. Farms devoted to staple crops were converted into agribusiness plantations, industrial zones and real estate enclaves displacing subsistence producers in the process. In the wake of the financial and economic crisis brought about by the Asian currency meltdown in 1997, employment in agriculture suffered. In 1998, agriculture lost 710,000 jobs. In 2000, the sector suffered a loss of two (2) more million jobs. Without significant leaps in output in the past years, agriculture’s capacity to absorb labor has indeed been severely eroded.

Religiously subscribing to the WTO framework of "reducing barriers in trade" and elimination of "trade-distorting" subsidies and support in agriculture, the government has taken a very minimal role in agricultural development in the past years. While such a stance has been adopted under the SAP policy of deregulation and privatization in the 80’s up to the nineties, the increasingly lesser and lesser intervention of government in agriculture was in no time more pronounced than in the post-GATT era. Increasingly, market forces and monopolies have dominated every aspect of agriculture -- from production, credit and marketing to semi-processing.

Government’s agricultural support in the form of price support, credit, research and development, and infrastructure has been on the decline. Table 15 shows that specialized government banks have stopped lending to agriculture since 1995. Land Bank, which is the repository of the Agrarian Reform Fund has allocated only 28% of its loan portfolio to agriculture and agrarian purposes. The expansion of irrigated lands has slowed down from an average of 25,000 hectares per year in the 70’s and 80’s to less than 10,000 hectares per year in the recent years (PPI, 2001). Declining government support is evident in the declining share of agriculture in the national budget from 3.99% in 1997 to 2.29% in 2000. See Table 14.

In view of this trend, it becomes apparent that the safety net measures designed supposedly to cushion the more vulnerable sectors from the negative impact of GATT are but empty promises and slogans. AFMA’s legislated budget allocation of P128 B to be released over four years has not been fully delivered. Hence, the safety net program was not able to take off the ground as government could not even increase the regular budgetary allocation for the Department of Agriculture.

Weak governance in agriculture is evident even in the government’s implementation of the S&D provisions in the WTO. The legislated measures designed to provide protection to local industries adversely affected by dumping and import surges such as the Anti-Dumping Act (RA No. 8752) and the Safeguard Measures Act (RA No. 8800) put all the burden on the affected sectors/groups to prove that such unfair trade practices exist. Such actions entail a lot of time and resources on the part of the complainant. Implementation experience at the global level showed that only developed countries because of their resources have successfully utilized these provisions to the detriment of developing countries. Indeed, without active government support in prosecuting such cases, the possibility of poor peasants winning against powerful transnational corporations is almost preposterous.

The negative impact of the implementation of the WTO AoA on Philippine agriculture and particularly on poor peasants and farm workers we submit must be seen in the context of the basic character of agriculture and its role in the economy. This is the only logical starting point of government in dealing with the issue of the AoA and agricultural trade liberalization. We argue that the WTO AoA and the premises upon which it was founded inherently work against Phil agriculture on the one hand. On the other hand, Phil agriculture is not in a position to compete with the highly subsidized industrial agriculture of the world economic powers.

First, small-scale, low-level-technology agricultural production prevails. The agricultural economy is characterized by small plot production of traditional food and cash crops like rice, corn, coconut and vegetables, with an average farm size of 1.5 hectares. Manual labor is dominant and the use of machinery is very limited. In rice, hand tractors and threshers are commonly used but in corn lands mechanization is even less.

This type of small-scale agriculture coexists side by side with export agriculture producing mainly traditional exports like coconut and cane sugar grown in large haciendas and also banana and pineapple grown in plantations operated by transnational corporations mainly in the island of Mindanao; with large integrated production in the livestock sector; and with commercial fishing employing modern fishing gears.

Nonetheless, the level of technology in general is very low. Agricultural production relies mainly on sheer peasant brawn and simple farm tools. In irrigated rice lands, peasants employ mechanically powered tools like hand tractors and threshers. Mechanized farming typical of capitalist agriculture exists only in TNC-operated pineapple and banana plantations and which represent only a small fraction of farms in the country.

Given this primitive technological core of agricultural production, productivity and efficiency are obviously very low. For example, corn production per hectare is 5 times and in rice 3 times bigger in the industrial economies than in the Phil farms. The sugar industry, absent any radical policy reform will certainly lose to the Australians who produce cane sugar at half the cost we do.

This backward state of Philippine agriculture precludes fair competition ("level playing field") in the international market. It is obvious that small peasant producers in the South can not compete with the large TNCs that dominate agricultural production in the North whether in the international and the domestic markets.

Second, exploitative relations prevail in agriculture. The age-old problem of land concentration and of course the attendant land rent still prevails. Large farms of over 12 hectares comprising 43 % of total farms are owned by only 5 % of the total landowning class. Bigger farms of over 50 hectares, representing 21% of total farm area, are owned by a smaller 0.5% of the landowning elite. The vast majority of small farms averaging 1.5 hectares comprise less than 1/5 of total farm area and are distributed among peasants and small independent farmers who represent 67% of total landholdings.

On top of land concentration and land rent, merchant monopolies dominate the marketing and distribution of agricultural inputs and products. This leads to predatory pricing of agricultural products. In many cases, the landlord and the trader are one and the same, collecting rent on land, farm machinery and post harvest facilities while at the same time earning profits from their merchant operations and usurious money-lending activities. In the rice and corn sector, merchants who are not necessarily landowners operate in a big way -- lending money for subsistence of the peasant family or for production, collecting rent on farm machinery and cornering the produce.

Since the "green revolution" the introduction of chemical based farming technology has increased the cost of production for practically all crops -- rice corn vegetables. This has provided another basis for the accumulation of merchant profits and usury. Increased productivity if any did not mean increased incomes for peasants. Rather it meant increased profits for the TNC suppliers and the local merchants.

The result of such a structure of production is impoverishment of the peasants. Take for example the case of rice. One study shows that a rice farmer earns only a measly net income of 9% from one hectare of production, while 22% goes to land rent and interest on loans, 30% to merchant price mark-up, 20% to post-harvest facilities and transportation and the rest to other costs of production like chemical inputs, hired labor and land preparation. Thus, the peasant is squeezed dry and is left nothing to improve production. (Lim, 1996).

The implication of this structure of the agricultural economy is obvious. The values created within agriculture are taken out of agriculture and leaves agriculture nothing for its development. These structural inequities are at the bottom of the low level of development of agriculture. Fixed to this primitive state, peasants are impoverished and have no fighting chance in a liberalized trading regime.

Seven years into the WTO-AOA, Philippine agriculture fared no better. On the contrary, it has seriously undermined the local economy and the country's food sovereignty, destroyed livelihoods of poor peasants and subsistence producers and retarded agricultural and economic development.

The haste by which the AOA was implemented in the country without thought and regard as to its impact on the vulnerable agricultural sectors had only succeeded in prying open agriculture to cheap imports and subjecting farmers products to unfair competition from highly subsidized products of the North. Many of those who benefitted are the big companies and traders who profited from the lower prices under MAV such as the big rice traders, integrators in poultry and livestock who avail of cheap corn imports, and multinational companies.

The promise of market access in developed countries did not materialize as the AOA is not really about increasing market access for developing countries but expanding market opportunities for the big players such as the US and EU. It was too late in the game when the Philippine government realized about the lack of "reciprocity" on the part of the developed countries. It had already committed the elimination of the remaining trade barriers in agriculture by setting bound tariff rates way below what are stipulated in the agreement. Based on its unilateral liberalization program government committed to the lowering of tariffs at 3% by the year 2005.

The AOA seriously eroded the country's food sovereignty by legitimizing dumping of cheap food imports. By tearing down remaining barriers to trade, the AOA ensured powerful agricultural exporters from the North a ready market for their products while depriving the country's capacity to produce adequate and quality food for its population.

The WTO-AOA worsened existing exploitative relations in agriculture. Land monopoly intensified as agribusiness corporations, commercial producers and the landed elite expanded their landholdings and intensified production for exports. Traders and big agribusiness corporations expanded their control in credit, marketing and processing. Agricultural trade liberalization reinforced further the export-oriented import-dependent model of Philippine agriculture. In effect, the WTO-AOA under the guise of "free trade," only succeeded in further cementing the colonial trade relations between the Philippines and advanced industrial nations.

The Philippine government's accession to the WTO-AOA is but a culmination of a set of structural reforms began in the 80's aimed at fully liberalizing and deregulating the economy. Together with policies imposed by the IMF-WB's Structural Adjustment Program, the WTO-AOA succeeded in fully opening domestic market, putting an effective cap to agricultural support and hence pushing the most vulnerable sectors such as the poor peasants and agricultural workers to bankruptcy, and fully re-orienting production from one aimed at the needs of the domestic population to the demands of the international market. The Philippine government by abandoning its function to actively intervene in promoting agricultural growth and development in favor of "free trade" and the operation of market forces has virtually allowed the impoverisation and exploitation of poor peasants.

The triumph of the US and developed countries to push for the negotiation of a new round in the fourth WTO Ministerial Meeting in Doha, Qatar despite the clamor of developing countries against a new round, signals an increased offensive towards accelerating trade liberalization and economic globalization. While a new round was not actually launched in Doha, the process for opening up negotiations for new agreements such as on transparency in government procurement, investment and competition policy began, with the US and other industrial powers securing the commitments of the WTO members for a new round of negotiations after the fifth ministerial meeting. This will mean increasing inequities between and within nations and wreaking more havoc on the economies of developing countries as the imbalances inherent in the existing WTO agreements were never redressed.

The demand of the developing countries to review first these agreements such as the AOA and TRIPs were not taken up, instead the meeting merely "acknowledged the need to review implementation issues." A severely watered down agriculture declaration calling for the "phase-out" of subsidies came out because of pressures from the European Union. Likewise, there was no commitment to strike out patenting of life forms under the TRIPS Agreement, a key demand of developing countries in Doha.

The manner by which the US forced down their agenda on the throats of the less powerful nations speak of the undemocratic character and decision-making processes in the WTO. The use of carrot-and stick tactics in the Doha negotiations as well as the manipulation of the Sept. 11 events to drum up support for US economic and political interests ensure that developing countries toe the line and abandon their remaining national interests and agenda as what happened to India, Pakistan, Malaysia, etc.

This only shows that the US and developed countries will use all resources at their command (aid, loans, etc.) as well as intimidation and bullying tactics to pursue their agenda for trade and market expansion, despite the growing resistance of developing countries.

The implications of the above with regards to state policy in the current negotiations in the WTO and specifically with regards to the Agreement on Agriculture are obvious.

The current negotiations now come within the framework of the new comprehensive round which would expand rather than diminish the coverage of "free trade." The government should resist the pressures applied by the world's economic powers and give primacy to the national economy.

For a start, Congress should immediately conduct a thorough review of the Philippine commitments to the WTO. This review shall look into the impact of the WTO on agriculture (and possibly industry) to lay the basis for policy changes and legislation to protect sectors adversely affected by trade liberalization. The review should not be confined to specific commitments but should include the whole rationale for getting into the AoA in the first place. Congress should see to it that in this review the perspective of small peasants, through their own organizations, are heard and that the agricultural sector be not misrepresented by a handful of agribusiness corporations and traders.

State policy should take the livelihood of peasants and farm workers the majority of the labor force as the explicit starting point. The country is an agricultural country. Although agriculture contributes about 20 percent of the gross domestic product, it employs over 50 percent of the total labor force. Agriculture in this sense is the major pillar of the economy. The overwhelming numbers of agricultural labor force are small peasants that are very vulnerable to the vagaries of the world trading system. Of the small peasants that constitute 95 percent of the agricultural labor force, 50 percent till the land as tenants or owner cultivators. The other half work as itinerant labor force moving from one area to another.

The bias should be for protection of peasant agriculture in consideration of the livelihood of the peasants. The so-called "safety nets" in so far as they are meant to mitigate the bad effects of trade liberalization rather than develop agriculture, can be futile. Small peasants do not stand a chance against TNCs in a liberalized economy.

Reforms in the external trading regime should be coupled with internal reforms. The two policy areas are complementary. An unfavorable external trading regime could roll back internal reforms assuming that the latter were in the right direction. But it is the internal reforms that build the foundation for a dynamic agricultural development.

The internal reforms include -- land reform, the break up of merchant monopolies, and a program to overcome the import dependence of agricultural production. Government policy as, stated in the land reform program, is the establishment of viable family based farms. This is far from being accomplished due to the failure of government’s agrarian reform program. Certainly, viability is dependent on a whole set of policy environment only government can provide. It is, therefore, a political question.

The viability of agriculture is an absolute necessity for development not to mention of survival in the competition in the world market. Irony of it all is that government by liberalizing agricultural trade leaves the peasant who is weighed down by old forms of exploitation like land rent, usury and merchant predatory pricing at the mercy of heavily subsidized TNC.

The main thrusts of agricultural development should be reviewed including the Government’s singular focus on export crop production. The dual role of agriculture -- production for export and food production for the domestic market is one that has been imposed on the country by colonial domination. This dual role remains to this day. How the economy is directed to fulfill this dual role is of primary significance to the country’s food security since these dual roles can come in conflict with each other, as has been historically the case.

The country’s food security should first of all be based on food self-sufficiency. Dependence on imports for food and other needs is certainly very risky from a national point of view.

Government should take a second look at the so-called "safety nets." The concept is certainly flawed because it stems from the premise that free trade as operationalized by the WTO is inherently good and what remains to be done is to ensure "safety nets" for the handful of "losers." The fact is that Philippine agriculture (and also industry) is inherently disadvantaged; that government must support rather than withdraw from intervention in the agricultural sector.

The Philippines should withdraw from the Cairns group, which is only being used by the US in its rivalry against the European Union. It should instead seek alliances with countries and groups within the WTO that reflect the perspectives of the developing countries.

Starting from the interests of the majority of its citizens that are negatively affected by the liberalized trading regime, the government should work for a suspension of the AoA at least until internal reforms have been put into place and agriculture would be competitive in the world market.

In the final analysis the government should insist on its sovereign right to protect dis-advantaged sectors of the economy especially peasant agriculture. This principle should be paramount over the principles of "free trade" which after all, but especially in the period of implementation of the Uruguay Round, has been proven to work against vital sectors of the economy.

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* A Paper Presented during the NGO-PO-Legislators Forum on "Philippine Agriculture under WTO-AoA," Sulo Hotel, Quezon City, Philippines
December 12, 2001

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