Tue, Jul 09, 2013 page8

• Farmers to suffer with free trade

  • By Du Yu 杜宇
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  Under the service trade agreement signed with China last month, Taiwan would open up service sectors such as agricultural product processing and storage, and set up free economic zones in the hope of attracting overseas investment.

  Agricultural officials keep telling farmers to be less conservative and more open-minded, but has the government given farmers a level playing field and taught them how to face these new trade challenges?

  The big problem for Taiwan’s farming is in the low prices of agricultural products. Successive governments have held prices down out of concern for national food security, commodity price stability and industrial and commercial development. As such, prices are not decided by the market and farmers’ incomes have been consistently lower than the national average.

  With incomes not matching effort, many farmers have left the countryside. This impedes new knowledge and new techniques, making farming less efficient or able to meet new challenges.

  Past governments imposed various restrictions on the purchase and sale of farmland, leaving each farming household with an average of only about 1.1 hectares of land. Farmers can hardly compete with large-scale farming as practiced overseas. Also key to maintaining stable production and marketing is authorities having a firm grasp of the actual production situation. Yet they are unable to grasp the nation’s basic agricultural data, let alone plan production or establish early-warning mechanisms.

  Lacking information, farmers make decisions based on current product prices and on what they see their neighbors planting. The inability to make rational predictions, means imbalances between production and sales occur almost every year, while many farmers live in hardship.

  Under such circumstances, how can Taiwan open up its agriculture to compete with better-prepared countries?

  Logistics is a very important link in the farm product supply chain, involving the processing, packing, storage and transport of agricultural products all the way up to consumers. In line with the “smiling curve” theory of added value, the supply of seeds and saplings at one end of the agricultural supply chain and branding and services at the other, are important for adding value to products and making the sector more competitive. They generate much greater profits than those earned by frontline farmers engaged in production.

  Research shows only about 24 percent of the consumer purchase price of products goes into farmers’ or fishermen’s pockets, while 75 percent goes to the downstream stages of processing, transport, marketing, sales, hospitality and tourism, and to the upstream stage of agricultural inputs.

  Therefore, helping farmers on the front line obtain a share of these profits is imperative to increasing their incomes and motivation to stay in the business.

  Japan promotes such policies to ensure sustainable agriculture and fisheries industries as it faces the challenges of entering international trade organizations. The policies are centered on producers, encouraging farmers, people in fishing and forestry workers to do their own processing and sales. This can create local business opportunities and new kinds of business, making these sectors more competitive globally.

  Yet Taiwan’s government intends to allow overseas companies, especially from China, to engage in agricultural product logistics and related services in Taiwan. In the end, the nation will likely lose its autonomy regarding all stages of agriculture, including production, processing, techniques, and marketing.

  Furthermore, China’s agricultural product logistics is beset by many problems. For example, its basic transport and communication infrastructure is weak; most farming is done by small-scale individual household producers; it has insufficient equipment for transport, storage, and loading and unloading of agricultural products; the planning and distribution of farm product markets are irrational; and agricultural technology is not widely applied. All this makes it hard for Taiwan’s farming sector to link up with China’s and free trade will pose even tougher challenges.

  Officials and academics often seriously underestimate the value of agriculture simply because it accounts for less than 2 percent of GDP.

  In theory, free trade gives every country equal opportunities and rights to pursue its best interests, but the reality is rather different. Large economies manipulate free-trade negotiations to force others to accept their products. In view of this reality, agriculture should not be made entirely dependent on market forces.

  There are many challenges ahead for Taiwan. Are we ready to face them?

  Du Yu is chief executive officer of the Chen-Li Task Force for Agricultural Reform.

  Translated by Eddy Chang
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