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Globalization Creates A Race To The Bottom

Th e Wo r l d Tr a d e Organization’s (WTO) Public Forum, which happens every two years, was held in Geneva at the end of September. There were few farm groups represented at the forum, but the CFA and some of its members did attend.

Walking into the plenary session can be likened to walking into church. The permanent facilities at the WTO are first class. The room is dimly lit with soft classical music playing as the participants quietly, yet expectantly, walk in. Across the backdrop of the stage, projected in big letters, is the statement “Global Problems: Global Solutions.” The music stops. The podium is set ablaze by spotlights. Director general Pascal Lamy rises to deliver the sermon. This is the Church of Free Trade. Globalization will be our salvation and protectionism is the demon!

It is estimated that there are one billion people who do not have sufficient food for either economic or accessibility reasons. By 2050, it is projected that the world’s population will double. How are we going to produce enough food for this population? How are these people going to afford the food produced? Well, if you subscribe to the doctrine of the Church of Free Trade – globalization is the answer.

Globalization’s goal is the production of large volumes of cheap food. Of course, this relies on the lofty assumption that a perfect market free of subsidies and trade restrictions will allow the economic law of supply and demand to play its true role and somehow achieve this Utopia. Faith and theory as opposed to empirical data says that globalization is the answer. The welfare of those producing the food is not considered and all the focus is put on the trade volume leading to the consumer.

Is globalization Utopia? It is my thesis that over time farmers would be racing to the bottom to pick up market share. Globalization would in the short term achieve its goal – large volumes of cheap food. Large-scale operations achieving economies of scale selling to multinational corporations would attempt to achieve the efficiencies needed. The race to the bottom would ensure that we would end up with a few very large multinational corporations ultimately controlling our food supply.

Protectionism is the other extreme. When borders are closed tight, trade ceases and the standard of living drops. An exporting country like Canada cannot afford to batten down the hatches. We export our surplus production and hope to generate a profit by doing so. Hope is the operative word. There are so many variables – world climatic conditions, exchange rates, competitive production volumes, government policies.

Perhaps the answer lies somewhere in between the two extremes. Canada’s balanced trade position may be a step in the right direction. However, we do not have an articulated strategy that accomplishes this. We need to think in terms of what is required to entice both domestic and foreign consumers to demand Canadian product. A focus on making Canadian product the very best in the world, one that is demanded, may be part of the answer to surviving a form of globalization. Faith alone will not solve the problem. Farmers, governments, and consumers will have to continue to work in order to find the best mechanism, between globalization and protectionism, for sustainably feeding the world.

Garnet Etsell is second vice-president of the Canadian Federation of Agriculture.

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