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Last Updated: 11/17/2005The Meaning of DR-CAFTA
The Dominican Republic-Central America Free Trade Agreement is near completion. It has been ratified by all parties except for Costa Rica, who most analysts agree is likely to sign the agreement sooner or later. Meanwhile, a ferocious debate has sprung up of the future affects of this agreement, and both sides have their narratives: One, that the agreement will cause growth and prosperity, the other that the agreement will plunge impoverished peoples further into the depths. So which is it? The narratives obscure the truth.
"With DR-CAFTA, Central America and the Dominican Republic have chosen a path that can break the cycle of poverty that has entrapped the rural poor. It’s a course that moves beyond the past of economic isolation and closed markets, allowing a gradual transition that safeguards the poor today, while facilitating the adjustment to a more advanced future of greater productivity and integration."
"Adjustment initiatives help poor farmers move from subsistence farming to higher value production. Working together, governments of the region, supported by the United States and international institutions, are promoting economic growth and reducing poverty."
Office of the United States Trade Representative. DR-CAFTA Policy Brief. "Meeting the Needs of the Region’s Rural Poor: DR-CAFTA Recognizes Sensitivities and Expands New Opportunities." May 2005.
"The Free Trade Agreement between the United States and the Central American countries together with the Dominican Republic (DR-CAFTA) threatens the livelihoods of thousands of small farmers who already live in poverty. The opening of markets exposes the region’s producers to unfair competition from the United States, whose agricultural industry receives enormous amounts of domestic support each year. If ratified by the U.S. Congress, the Agreement will increase misery in a region where 60 per cent of the impoverished population lives in rural areas."
Oxfam International. Briefing Paper 68. "A raw deal for rice under DR-CAFTA: How the Free Trade Agreement threatens the livelihoods of Central American farmers." November 2004.
In May 2004, five Central American nations (Guatemala, Nicaragua, Honduras, El Salvador, and Costa Rica) signed the Central American Free Trade Agreement (CAFTA) with the United States, an agreement which was joined shortly thereafter by the Dominican Republic and re-branded DR-CAFTA. As of November 2005, Costa Rica is the last country in which legislative ratification is still pending, and most analysts believe it is only a matter of time before ratification occurs.
Yet the domestic and international debate regarding the merits and menaces of DR-CAFTA is still sharply divided along ideological lines. One of most divisive issues has been DR-CAFTA’s possible negative consequences for the livelihoods of small agriculturalists, and for good reason.
In Costa Rica, like other Central American countries, the agricultural sector is a major source of employment (Costa Rica’s official agricultural labor force represents 19 percent of the total active labor force)(1) and a significant component of the economy (10 percent of GDP). More importantly, in Costa Rica there is still strong cultural identification with campesino (farmer) and sabanero (cowboy) based traditions, and patriotic pride in the relatively egalitarian historical patterns of land distribution and family farm structures oft cited as the pillars of the Costa Rican liberal democratic progress.
Given the importance of agriculture for employment, the economy, and cultural identity in Costa Rica, it is understandable that any drastic change in trade policy that threatens livelihoods in the agricultural sector would engender a contentious debate. The question then becomes: is DR-CAFTA really a threat to Costa Rican agricultural livelihoods?
Ask the Question, Get the Story
Unfortunately the verdict is foggy, as both proponents and critics of the free trade bandwagon employ intricately woven—albeit conflicting—policy narratives, which, according to Sutton, serve as "an attempt to bring order to the complex multitude of interactions and processes which characterize development situations."(2) These narratives, exemplified in the quotations from major policy actors at the beginning of this article, prescribe and project anticipated outcomes for nearly unpredictable development scenarios, like the effects of trade liberalization on specific agricultural livelihoods. Free trade equals opportunity, productivity, and integration on the one hand; and free trade equals impoverishment, food insecurity, and marginalization on the other.
Policy narratives are so effective because they employ prevailing development discourses, defined succinctly by Sutton as "configuration(s) of ideas which provide the threads from which ideologies are woven."(3) Embedded with normative values, reinforced and reaffirmed through constant reiteration, development discourses conceal a broad host of implicit values and assumptions regarding the expected results of development policies. More significantly, discourses serve to marginalize other modes of thinking, effectively "putting on the blinders" in terms of potential development alternatives.
I contend that DR-CAFTA’s implications for Costa Rica’s small agricultural producers are obscured by speculative policy narratives based on entrenched development discourses from groups at the opposite ends of the ideological spectrum. Some NGOs, such as Global Witness and Oxfam, claim that a continuation of U.S. agricultural subsidies and the “dumping” of cheap imported agricultural products onto Central American markets will devastate small producers, while increased dependency on export products and susceptibility to fluctuations in global commodity markets further imperils food security at the country and regional levels.(4) Conversely, U.S. government entities like the State Department and the Office of the U.S. Trade Representative, along with the Costa Rican Foreign Trade Ministry (COMEX), assert that graduated trade liberalization for "sensitive" agricultural products, combined with "adjustment initiatives to help poor farmers move from subsistence farming to higher value production," will assist small farmers, promote economic growth, and alleviate poverty.(5)
So What Will Happen Under DR-CAFTA?
Amidst all the smoke and mirrors of policy narratives, there are some concrete facts that merit mention. Most agricultural exports from all DR-CAFTA signatory countries to the U.S. are currently granted preferential treatment under the conditions of the Caribbean Basin Initiative (CBI), a unilateral trade initiative enacted by the U.S. during the Regan Administration. Thus DR-CAFTA countries have little additional agricultural market access to gain from the proposed agriculture conditions of the Trade Agreement, especially since exports of sugar and 47 derivatives of it will barely change under the protections negotiated into the agreement by the U.S. What DR-CAFTA countries do stand to gain is the transformation of CBI benefits from a unilateral status, and its respective uncertainty, to a bilateral permanent relationship with clear and guaranteed rules for governing trade.
On the other hand, DR-CAFTA’s potential benefits for U.S. agriculture are undoubtedly lucrative: the American Farm Bureau Federation estimates that the Agreement would expand U.S. farm exports to the region by an estimated $1.5 billion a year.(6) However, how much this projected expansion would displace or undermine local production is extremely difficult to estimate.
Due primarily to agro-geographical conditions, most of the trade between Central America and the U.S. is complimentary, or essentially non-competitive. For example, the U.S. cannot produce tropical fruits, while Central America cannot produce wheat. Therefore liberalizing trade for these products ostensibly does little harm to the respective domestic industries. However, an important consideration to note is that the import of cheap agricultural commodities from the U.S. to Central America can undermine production of similar local products. A perfect example is the recent influx of subsidized soybean oil, which has captured a significant market share from the locally-produced palm oil. Even if commodities are not directly competitive, imports may displace local production when their consumptive uses are similar.
The persistence and scope of U.S. agricultural subsidies epitomize a case of blatant hypocrisy, and provide ample fuel to the critique that DR-CAFTA does not, in reality, represent "free trade." Actually, the U.S. obstinately refused to put its agricultural subsidies on the DR-CAFTA negotiating table, opting instead to proceed through the channels of the Doha Round of WTO negotiations. Yet again, the ramifications for Central American agriculture are unclear. One argument is that abnormally cheap agricultural commodity imports from the U.S. would actually benefit consumers in DR-CAFTA countries through savings in the marketplace. Yet cheaper food imports do not necessarily translate to lower prices for consumers, as the price difference is usually absorbed by numerous middlemen in the commercial process (importers, retailers, etc.)
More importantly, the effect of lower food prices on small farmer livelihoods in developing countries is addressed by the Food and Agriculture Organization of the United Nations (FAO) in its recent report, The State of Agricultural Commodity Markets:
Lower food prices mainly benefit consumers in developed countries or consumers living in urban areas of developing countries. Net food importing countries benefit from savings in foreign exchange. However, in so far as lower world prices are transmitted to local markets, the vast majority of the world's poor and hungry, who live in rural areas of developing countries and depend on agriculture, suffer losses in income and employment caused by declining commodity prices which generally outweigh the benefits of lower food prices.(7)
For a case study that validates this hypothesis, excellent data has been gathered over the past 12 years regarding the Mexican experience since the signing of NAFTA, illuminating the effects of this free trade agreement on Mexican small farmers. Public Citizen’s Global Trade Watch estimates that 1.5 million Mexican farmers have lost their livelihoods under NAFTA’s agricultural terms, on which DR-CAFTA’s agricultural provisions are based.(8) Even the Office of the U.S. Trade Representative acknowledges a reduction in the number of Mexican corn growers since the commencement of NAFTA, although it does not provide a numerical estimate.(9) Despite a dramatic fall in domestic corn prices (attributable to the importation of subsidized U.S. corn), tortilla prices increased substantially in real terms in the 10 years since NAFTA’s implementation.(10) This can be explained through the combination of two factors: First, the tortilla market has long been a duopoly; second, consumer price supports were removed by the government through its agricultural liberalization program.
In January 2003, an estimated 100,000 Mexican farmers marched in DF demanding a renegotiation of NAFTA’s agricultural provisions, prompting the Mexican government to consider restrictions on imports of key food security crops, such as corn and beans. While the Mexican and Costa Rican campesino sectors differ in many respects (e.g. the intricacies of the Mexican ejido system), some historical comparisons can be extrapolated and applied to consider the prospects for Costa Rican agriculturalists under DR-CAFTA.
So Now What?
It is extremely difficult to construct accurate future scenarios for agrarian livelihood security based on policy and trade regime changes yet to be implemented. The task, however, becomes exponentially more difficult when obscured by speculative policy narratives based on entrenched development discourses from groups at the opposite ends of the ideological spectrum.
Yet these policy narratives, and their host development discourses, do not materialize from thin air. Construction, propagation and sustentation of both the foundational development discourses and their progeny (the devised narrative) are carried out by physical human beings, adherents to the same development worldview, and relating through their respective policy networks/coalitions. Simple efforts at discourse and network analysis help us understand both these social ideological networks, their motivations for “development” of the other, and strategies for negotiation or resistance.
I conclude with a reference to the precautionary principle, which stresses the necessity to err on the side of caution when confronted by uncertain and potentially harmful scenarios. Concerning the political economy of “free trade,” even in a pure and un-subsidized form, I believe that an exception should always be permitted for issues pertaining to food security and food sovereignty at all levels: from community to nation-state. In terms of any trade agreement (especially involving Central America), production of basic food staples under the title of “agriculture,” cannot be objectified and commercialized as just another “commodity,” vulnerable to the shifting political winds of trade policy and international market availability. Basic grain and vegetable production (different from export-oriented agriculture), is just too important: as a foundation for human nourishment (food security); many local, regional, and national identities (cultural liberty); and of our human relationship to the land (ecological sustainability).
(1) Food and Agriculture Organization of the United Nations (FAO), 2004. FAOSTAT on-line statistical service. Rome: FAO. Electronic Database available at: http://apps.fao.org.
(2) Sutton, Rebecca. "The Policy Process: An Overview." Overseas Development Institute Working Paper 118. London; August 1999.
(4) Global Witness. "Inhuman Economies: What DR-CAFTA and free trade agreements really mean for Nicaragua, and the rest of Central America." Oxfam Press Release. “The Central American Free Trade Agreement: Three Reasons for Congress to Vote No,” January 22, 2004.
(5) Office of the United States Trade Representative. DR-CAFTA Policy Brief. "Meeting the Needs of the Region’s Rural Poor: DR-CAFTA Recognizes Sensitivities and Expands New Opportunities." May 2005.
(6) Office of the United States Trade Representative. DR-CAFTA Policy Brief. "The Case for DR-CAFTA." February 2005.
(7) FAO. The State of Agricultural Commodity Markets. Rome, DATE
(8) Public Citizen. Global Trade Watch. July 2004. www.tradewatch.org
(9) Office of the United States Trade Representative. DR-CAFTA Policy Brief. "Meeting the Needs of the Region’s Rural Poor: DR-CAFTA Recognizes Sensitivities and Expands New Opportunities." May 2005.
(10) Henriques, Gisele and Raj Patel. Food First Policy Brief #7. "Agricultural Trade Liberalization and Mexico." August, 2003.
Bejamin Goldstein is a dual-Master's candidate at American University and the University for Peace. He is studying Natural Resources and Sustainable Development.