By Erika Hernandez, Humanitas Global
The Trans-Pacific Partnership (TPP)* agreement is likely to benefit countries with a highly automatized agricultural sector as well as the wealthy in developing countries. Countries with the largest share of agricultural area and automatized agricultural systems like the United States and Australia will seize the demand of agricultural products from developing countries. While TPP will benefit most income strata, it will negatively affect the most vulnerable and poor: small farmers in Latin America, in the Southeast Asia and Pacific. According to the FAO, Southeast Asian countries have a solid population of small farmers and Latin American countries still have an important rural population. Today, TPP stands for approval in the congresses or parliaments of the signatory countries. Although the agreement promises to better the livelihoods of those population groups capable of buying foreign products, it will stifle the production of small farmers.
Neoliberals often regard international trade as a way of improving living standards of trade participants. Production theory states that one of the benefits is reduced production time as well as lower costs, which increases people’s opportunities for additional spare time. Accordingly, these transactions naturally produce winners and losers, which, in this case, threaten the existence of small and medium farmers in developing countries. While international trade theory sees this cycle as natural, it misses to identify its human aspect: what happens when labor is displaced? Services trade or labor provisions in most agreements do not consider offering training to displaced workers. (One exception is Australia which grants training to its Small and Medium enterprises on how to approach free trade agreements.) This is a highly relevant aspect that trade agreements overlook and demands urgent consideration given the significant displacement that it produces. From 1990 to 2000, Mexican immigration population in the US more than doubled and surpassed average immigration levels (from 4.3 million to up to 9.2 million).
Mexican immigrants harvesting organic kale in Wellington, Colorado, October 2011. Credit: John Moore.
Trade agreements need to be accompanied by other policy instruments that ensure skills of small farmers are optimally used in places that demand their work. Today, there is a growing niche in countries like the United States and Mexico asking for organic and fair-trade produce. Because current economic theory does not look at these loopholes, national and local policymakers need to minimize the negative social effects of these agreements. One example is my home town, Cholula, a small city in Mexico that has a considerable number of small farmers although their number has been largely reduced throughout the years. Cholula’s local market has a huge variety of organic produce that can be sold in specialized markets and compete with organic foreign produce. In order to do so, a marketing campaign would be necessary to shift consumers’ preferences for local produce. In the end, foreign and local organic produce is all the same.
For some, TPP will become the new NAFTA (North-America Free Trade Agreement). Trade tariffs from the 12 countries under the agreement are now to be reduced. Some tariffs will be immediately liberalized – like soybeans in Japan, others will be gradually phased out – like in Vietnam, while other countries will reduce quotas – wheat in the case of Japan. The TPP will also include investor-state provisions that will allow companies to contest government decisions. While this type of dispute resolution mechanism aims to adopt inclusive policies, large companies able to pay legal and lobbying-related fees, will be the only organizations capable of disputing government decisions. Several small farmers are the most likely losers which, if united, could create a strong coalition that could dispute decisions. However, the spread and lack for coordination of these groups across nations, makes it unlikely to create cross-border coalitions but not impossible.
Although the effects of TPP are not yet clear, NAFTA offers some insights of the possible outcomes. One NAFTA outcome has been labor displacement. It inadvertently forced Mexican small farmers out of business. While some farmers were able to seize jobs in the manufacturing sector, others saw themselves forced into unemployment. This forced farmers and others to join the US agricultural market, causing illegal immigration to scale during the 90s. On the positive side, not only did Mexico’s middle class began to expand, but Mexicans were also happy to buy American products at affordable prices. NAFTA, overall, has been a beneficial agreement for the middle and upper classes of the trade partners. Nevertheless, the price that Mexico paid was out of touch with the needs of the farmers and the poor. A similar and more increased consequence is likely with the entry into force of the TPP: not only will Mexican farmers continue to migrate to the US and Canada, but an increased labor displacement to Australia from other Asian countries is set to happen. Additionally, countries like Mexico and Chile are likely to see greater number of immigrants from both Central and South America. While it may be true that international trade produces winners and losers, is this the kind of economic interactions that we wish to continue fostering? Economic theory and practice requires integrating win-win solutions. In the long-run, social responsibility not only keeps companies but also governments afloat.
