The California Experienceeffects Of Global Trade Agreements

Some of the harms experienced by many farmers in the North by WTO, NAFTA, and other trade agreements can be illustrated by the experience of California. If California were a nation, it would be the fifth largest economy in the world. It has led the nation in agricultural production for more than 50 years, with agricultural exports of $8.2 billion in 2004, representing 17 percent of the U.S. total.43

California farmers and ranchers produce more than half of the nation's fruits, nuts and vegetables. The majority of California food crops remain in the U.S.—over three-quarters. The remaining 26 percent are exported. However, because of international trade and investment agreements, along with U.S. domestic policies that collude with these rules, many agriculture sectors have been hard hit due to an influx of cheaper foreign imports. The following illustrates some of the effects:

❖ According to a 2001 report from the California Farm Bureau: "Prices for many of the state's 250-plus commodities have collapsed due to foreign imports, including raisins and other dried fruit, olives, garlic, honey, apples, apricots, peaches, oranges, pears and tomatoes."

❖ Two-thirds of the avocado export market has been lost since the mid 1990s, while avocado imports from south of the border have increased by 300 percent.44

❖ California's cotton and rice growers are seeing crops prices drop as much as 30 percent compared to the mid-1990s.45

❖ California was formerly the nation's flower capitol, but recent imports from Colombia and other Latin American countries have depressed prices to California's fresh flower growers and caused many to go out of business.

❖ Over the last seven years (since 2000), California has lost 10,500 farms. Many of these were small farms that were bought out by large farm operations (USDA).

WHAT HAPPENED?

During the last decade, international and bilateral trade agreements such as NAFTA, the WTO and other instruments of the globalized "free trade" system have opened up borders to products from around the globe. At the same time, global trade rules have eliminated any nation's right to enact quota and tariff mechanisms that could help protect and sustain domestic farm economies and natural resources. California's experience is little different from that of other countries and regions— farmers are now forced to compete with imports that cost lower than locally produced goods. Many farmers and rural communities are experiencing severe economic hardships.

"I tell people that under the best conditions, the worst farmers make money. Under the worst conditions, even the best farmers lose money; that's what we're seeing now," says George Leavitt, a farm adviser with the University of California extension office in Madeira County.

The "worst conditions" in a global economy mean that California growers must compete with commodities grown in countries where land, labor, energy, and water are often far cheaper than in California, as well as the rest of the United States. And it is only expected to get worse. China's recent entry into the WTO will most certainly affect California agriculture in a major way. According to an internal Farm Bureau memorandum: "With its large number of farms, ample resources and central planning, China is a continued threat as a major exporter of agricultural products at levels that could be harmful to the U.S. and California specifically."

That threat is already being felt. For example, despite transportation costs and a nearly 400 percent tariff, fresh Chinese garlic is being sold in California at prices considerably lower than the local cost of growing garlic. Almost overnight, California garlic growers faced a dramatic drop in income.

Even some of California's current top export crops could be threatened. Although table grapes remain in the top ten of California exports, China is beginning to send table grapes abroad and is expected to gain a significant market share over the next several years. Additionally, increased exports from Chile and Mexico (an increase of over 100,000 tons over the last few years) have already triggered lower prices and some California growers are already feeling the effects.

CALIFORNIA EXPORTS

Trade liberalization has expanded some markets for California farmers, however, as is the case in the rest of the U.S., most benefits have gone to large commercial farms. The 5,000 largest farms (those with over $1 million in sales) account for 75 percent of sales of agricultural products. About 11 percent of farms in California have annual sales of more than $500,000, while about 44 percent receive less than $10,000 in income.46

Almonds, wine, table grapes, cotton, dairy products, and fresh and processed citrus represent over 50 percent of exports, with the remaining 50 percent made up by dozens of other items commodities. Many of these commodities are not subsidized under U.S. farm bill criteria, which is why California receives only 4 percent of federal direct payments (2004).47

However, the majority of these payments go to large industrial operations—diary operators, cotton farmers, and recently sugar beet farmers. (Other types of assistance—loan and conservation programs, for example, are available for some other farmers; however, these support systems are minimal compared to the state's agriculture output.) Water usage is an indirect subsidy extended to most California farmers, but again, most benefits go to a small number of huge farms. For example, 10 percent of farms in California's Central Valley Project receive two-thirds of the water.48

While inequities of subsidy and support systems within California clearly need to be addressed, the egregious harm caused to African cotton producing countries requires even more urgent attention. (See Box Two: U.S. Cotton Subsidies Harming African Countries)

KEEPING IT LOCAL—GLOBALIZATION'S IMPACT ON CALIFORNIA'S ORGANIC COTTON

California remains the leading state in certified organic cropland, with over 220,000 acres, mostly for fruit and vegetable production. There are over 1,738 certified organic operators in California (as of 2002). Although one of the fastest growing segments in California, as well as U.S., agriculture, overall adoption level is still low—only about 0.5 percent of all U.S. cropland and 0.5 percent of all U.S. pasture was certified organic in 2005.49

In order for organic food systems to thrive and continue to grow, it is critical to reform U.S. economic and farm bill policies. It is also vital to understand how current international trade rules thwart the goal of reducing food and fibre miles, and further squelches small-scale and "local first" principles that maintain the integrity of organic models.

California's organic cotton industry serves as a good example of why it is so critical to understand global-to-local links before any systemic change favoring local systems of food production can occur. Before NAFTA and the WTO, many California cotton farmers joined a movement to grow organic. By 1994, over 17,000 acres of traditional cotton grown with heavy use of toxic pesticides were converted to organic cotton. This represented almost one-quarter of all U.S. cotton production. But a few short years after NAFTA and the WTO were enacted, only 130 acres remained of organic cotton production—today, the figure is at 80 acres. (See Part Three, page 51, for update on related alternative cotton crops/projects.)50

Why? To increase their margins, U.S. manufacturing companies chose to purchase organic cotton grown abroad at a lower price than they would have to pay U.S. growers. Pre-WTO, the U.S. restricted the quantity of imported cotton (organic as well as non-organic) and enacted import tariffs at levels that assured that U.S. cotton farmers would remain viable. These mechanisms are now WTO-illegal.

Turkey, Pakistan, and other countries produce organic cotton at a fraction of the price of California cotton because of much lower labor, land, and water costs. Free trade proponents might call this a "comparative advantage"; however, some "advantages" are questionable. For example, in some instances, water is cheaper in these countries only because of public-private loan schemes, and IMF and World Bank loans that effectively subsidize the diversion of water resources toward crop production. This water diversion itself brings many environmental harms and can also result in tragic social and cultural upheavals.

For example, a massive water diversion project in Turkey—the Southeastern Anatolia Project, or GAP—is so rife with political and environmental controversy that even the World Bank refused to fund this project, which includes the world's fifth largest dam—Ataturk Dam. The project is projected to irrigate 1.7 million hectares (4.2 million acres) of land. GAP supporters boast that, though the project is still not finished, Turkish cotton production has already tripled in the last decade, making Turkey one of the world's top cotton growing nations.

The World Bank declined to fund this project for two reasons. First, the GAP allows Turkey to control water flow into Syria and Iraq. This has obvious political implications and has ignited virulent disputes between the countries, as well as fired up historical ethnic hostilities between Kurds and Turks. Second, the areas designated to yet be flooded will displace hundreds of thousands of Kurds and Armenians from ancient cities and historical homelands. Additionally, the region where the tragic Armenian Genocide took place is among those slated to be put under water.

This is only one example to illustrate that while the principle of encouraging and supporting organic agriculture worldwide is important, it is critical to look at the big picture when charting out alternatives to industrial agriculture policies and systems.

ALTERNATIVE POLICIES FOR CALIFORNIA

Currently there are significant efforts by some government leaders and civil society movements to de-industrialize California's agriculture system and move it toward an ecologically healthy model that is also economically robust. A key challenge is to find ways to ensure decent incomes for California farmers that will not cause economic harm to farmers and rural communities abroad, especially in poor, developing countries. As noted earlier in this report, there are legitimate reasons why domestic or regional governments should encourage and support a vital agricultural base. However, rich countries should not be allowed to subsidize export crops at levels that enable dumping.

The case of California organic cotton demonstrates why it is essential that domestic and international policies apply the principle of subsidiarity. That is, policies should favor local production for local consumption over long-distance production and transport of goods. The subsidiarity principle encourages environmental stewardship and environmental health for the entire planet. It also can help build local cultural and social relationships, instead of potentially heightening social conflicts abroad.

GENETICALLY MODIFIED (GM) FOODS AND CROPS

International agreements such as the WTO's Trade Related Intellectual Property Rights (TRIPs) agreement make it much easier for GM technology to rapidly advance around the globe. GM crops are the ultimate tool of a corporate-led industrial agriculture system. Under a GM dominated agriculture system a handful of corporations own genes, seeds, and seed chemicals, further enslaving farmers and, in effect, controlling the world's food supply.

GM crops pose significant economic risks to California's farmers and food industries. Once planted in open fields, GE crops may contaminate the environment through pollen drift, seed mix-ups, and inadvertent transfer of seeds by humans, animals and extreme weather events. Contamination of California's crops with GM content may lead to domestic and foreign market rejection of California agricultural products. Additionally, California's organic sector, the largest in the U.S. could be threatened by GM pollution. As such, farmers, food handlers and processors, and other food companies may face serious economic losses.

There are at least 750,000 acres of GM crops in California, representing 2 percent of the state's agricultural area. Corn and cotton represent 98 percent of all commercial GM crops grown in the state. California is fourth in the nation in numbers of GM crop field trial permits and notifications. Crops most commonly used in GE field trials in the state include tomato, corn, cotton, rice, alfalfa, and grape.

Despite the prevalence of GM crops, state regulatory agencies do not monitor these crops or consider their impacts on the state's unique environment and agricultural economy. Currently, only pharmaceutical and industrial crops require field trial permits, and the environmental assessment is now entirely voluntary. Hence, in California the vast majority—82 percent—of GM crop field trials are grown under the notification process, and thus do not require any environmental assessment. In the absence of adequate state legislation and regulation, counties have initiated their own local bans on the planting of GM crops, although, such bans would most likely be ruled to be illegal by the WTO if challenged.

(Source for GM section: Center for Food Safety)

Box Five

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