Sunday, October 01, 2006

Globalization, Development discussions

are taking place in several sites. There seems to be some disenchantment with 'shining' stories and rethinking about development without subscribing to particular ideologies. Some of these are:

http://www.opendemocracy.net/arts-Literature/ulysses5_3938.jsp
http://www.geocities.com/wgfs2004/Iowa_is_not_far_from_Telengana.pdf

These two papers give background on subsidies in different countries and discuss
the effects of globalization on farmers in different countries. Discussions at:

http://blogs.telegraph.co.uk/foreign/peterfoster/sept06/capitalism.htm
http://curiousstall.blogspot.com/
http://www.theotherindia.org/rural/indias-farmers-bear-brunt-of-globalisation.html
http://www.passtheroti.com/?p=218#comment-1146
http://alternativeperspective.blogspot.com/

In addition Madhkar Shukla is discussing the changing attitudes about business and markets in:
http://inspired-pragmatism.blogspot.com/

Some quotes from the second paper above:
"Many of the crops grown by Indian farmers come to a market place where the prices for these crops are
undermined by the agro-businesses and the subsidies they enjoy in their home countries. Take the case of
King Cotton. Between 1999 and 2002, the US agro-business share of the world cotton market grew to 40%
from 25%. This was entirely because of the $12.9 billion subsidy paid by the US tax-payer to the cotton
industry. In the same period, India’s imports of cotton grew by almost 29%, while India’s production of
cotton has fallen. The US cotton crop, meanwhile, has grown to its largest amount since 1927. An
enormous impact is on West and Central Africa, where farmers would stand to gain at least $250 million
if the US stopped its subsidy. The loss to Indian farmers from US subsidies is calculated to be about $1.3
billion (in 2001). US cotton farmers would not remain competitive without the subsidy, and according to
the World Bank, less than a tenth of the farmers would remain in business."
From the first paper:
" 'Because you are, by a long way, the biggest seller of cotton on the planet - forty per cent of all exports. Your system is destroying the market!'

Mark Lange smiles without evincing the slightest impatience. He has heard this argument a thousand times and answered it a thousand times. But repeating and repeating again, smiling and smiling again are the two main jobs of the lobbyist. He quotes research. Serious research. Big professors. The best universities. 'You have good universities in France? This research comes to a clear conclusion: the world price doesn't depend on us. Let's be precise: we have a negligible influence, barely quantifiable.'

Later, in the charming motel we are staying in, French Quarters, a staging point much appreciated by clandestine lovers, I shall consult other figures. The subsidies artificially sustain unprofitable production. Without them, American farmers would stop planting cotton. With supply diminishing, prices would pick up: a rise of between five and seventeen per cent according to the experts. "

And so on. Similar stories about corn and sugar. This does not seem to be the 'invisible hand' where markets seemlessly adjust.
Erik Orsenna cocludes:
"In the field of agriculture, as elsewhere, multinational firms try to lay down the law. But here, more than elsewhere, families fight back. On this struggle depends what remains of humanity on our planet.
......
This leading role of time is something the lovers of the market wish to deny. Throughout the whole of history, national economies have been protected in their early years by customs barriers. This was the role of so-called 'infant industry' protectionism. They were left to face competition only when they had reached adulthood. That is to say, once they had acquired strength. This respite is forbidden to them today. Globalization, which obliterates space, wants also to kill time. Perhaps the increase in the price of energy, by making us pay properly for transport once again, will restore reality to space and resuscitate time."

3 comments:

kuffir said...

interesting paper - the one avowedly spanning global concerns in 'telangana and iowa'...

they say indian cotton farmers suffered losses worth 1.3 billion dollars between 1999-20002.. the trade never happened because the subsidy supported u.s., farmers were selling at a reasonable price to buyers in the u.s., so, at best, this can be described as notional losses.. so how can they castigate globalisation for a trade that has not taken place? i mean, nothing had been exchanged, so how did globalisation cause the death of farmers in india..when it hasn't even taken place...

the situation has reversed dramatically after 2002 - indian cotton growers have been growing and exporting more . so why do we still have suicides?

swarup garu,

this is the kind of rhetoric that we have constantly been bombarded with for the last ten years (yes, even before trade restrictions were lifted)..in india and especially andhra. and very vigorously for the last five years ..

'a significant fall in the incomes of the poorer farming population in india can be directly traced to the farm-subsidy and tariff structure that exist in the g-8 countries, mostly notably in the u.s....' the paper says in the beginning..does it go into the details further down to prove its charge? i'd agree that if there was greater trade i.e., globalisation, one could say that the tariffs and subsidies in the west are affecting indian farmers..how can one attribute notional losses to villains across the seas..?

this intellectual dishonesty, this eagerness to score debating points rather than find the actual problems affecting indian farmers has been clouding india's politics and policy ... look at the ambiguity in the objectives of the paper - does it want to study 'food security' or 'farmers' problems'?

in the end it does neither - succeeding only in taking potshots at 'neo-liberals' (i wish people would stop using these western terms in the indian context)..and at globalisation.

thanks again for the link.

gaddeswarup said...

Kuffir,
Thanks for your comments here as well as in National Highway, theotherindia, curious stall etc. As you have pointed out elsewhere, the reasons for farmers' problems are probably multiple and solutions may need many inputs. I will carefully look at the references you gave and and read and think more. This is why I started the blog; slowly learn for myself whether there is some pattern in these things both in the context of India and the world. On the otherhand, I do not hope to come to any conclusions quickly or ever and try to keep exloring bit by bit. Thanks.

gaddeswarup said...

Kuffir,
I looked abit more and talked briefly to an economist here about how prices are fixed.
I enquired a bit more. It seems that base prices are determined by different exchanges :cotton etc from Chicago, metals from London, diamonds from Belgium etc and various countries adopt their prices based on these. There are some tariffs, quota etc but in general the local prices seem to depend on the base prices plus transportation costs. Some countries (like China) control the local prices more than others and for different items how it works may be different depending on various agreements of the participants.
Overall, I get the impression that in cotton the prices are determined to a large extent by the prices set in Chicago.The article http://trade.indiainfoline.com/Commexwebsite/olw/fadc.pdf#
( published December 2004, This paper also discusses minimum support prices set by the Indian government and various state governments)
“US production will determine the price in the international market as the country has set a target of exporting half of its production in the current season’
From http://ncdex.com/products/products_agro_indian28mmcotton.aspx?Type=Gen
(date not clear. Quotes figures from July 2003)
Futures prices of cotton at the New York Board of Trade (NyBOT) serves as the 'reference price' for cotton traded in the international market.”
“Among several other reasons, it is 'the lack of availability of desired quality cotton' that has made many Indian buyers (particularly the export oriented units) to opt for purchases of foreign cotton despite enough domestic supplies. Most importing mills in India are ready to pay 5-10% premium for foreign cotton due to its higher quality (less trash, uniform lots, higher ginning out turn) and better credit terms (3-6 months vs. 15-30 days for local). Mills using ELS have been pleased with US Pima and its fibre characteristics. US has emerged as an important supplier in the last two seasons. Apart from US, India is also importing from Egypt, West Africa, the CIS countries and Australia on account of lower freight and shorter delivery periods offered to Indian buyers.”
According another source the import export figures in millions of dollars were 137.87, 377.64, 294.52 against 20.08, 9.08, 11.28 during years 1998-99, 1999-2000, 2000-2001.
These figures must have changed substantially but as the above article indicates, there are both imports and exports even later. For example, according to
http://www.fibre2fashion.com/news/images/newspdf/Indian_Cotton_report_20043.pdf#
imports are .07 million metric tons whereas exports are .80 million metric tons during 2005-06.
All this seems to imply that local prices are influenced by US subsidies but it is not clear to me whether farmers would not have been squeezed by somebody else. As Suri said in the EPW article of April 22, farmers seem to be squeezed from several sides and this may be only one of the squeezes.