Agrarian reform must precede TPP

By Du Yu 杜宇  / 

Mon, Oct 19, 2015 - Page 8

After SEVEN years of tough negotiations, 12 Pacific nations have finally reached an agreement on the Trans-Pacific Partnership (TPP). The deal is set to create the world’s largest free-trade zone, and as the economic gains from the multilateral trade agreement are likely to far surpass those of bilateral ones, Taiwan, South Korea and Thailand have all expressed their willingness to join the second round of talks.

Although the government has recapitulated that the nation must join the TPP, it does not seem to be taking any specific action. Even though it is not possible to disclose the details of the negotiations, the government could establish a dedicated agency to announce policy directions and specific support measures, which would demonstrate the extent of the government’s commitment to the deal.

The TPP is posited as an agreement of high quality and standards, covering a wide range of contents that surpass the scope of the WTO. The deal encompasses a sweeping range of measures, which include market access for agricultural products, textiles and clothing, and financial and telecommunications services; transparency on pharmaceutical and medical equipment; regulations on the origins of manufactured goods; customs administration and trade facilitation; food safety tests; animal and plant health inspection, and quarantine sanitary and phytosanitary measures; technical barriers to trade; investment, labor and intellectual property rights; and so on.

However, from Taiwan’s point of view, the most hard-hitting aspect of the deal is the opening of the domestic agricultural market. It is not clear how the government intends to do this in the short term — within three to five years — as it requires adjusting the structure of the industry and the work force, as well as raising competitiveness in order to be able to cope with competition from agricultural imports. The government needs to explain this to receive farmers’ consent and support.

Here are some recommendations from a professional point of view.

First, industry and workforce structures need to be adjusted. Since agricultural products generally constitute a buyer’s market, using environmentally friendly production methods — including the smart use of water, land, space, feed and medication — and paying attention to the well-being of animals, environmental sustainability and food safety are going to become ever more important to attract consumers.

Regardless of whether Taiwan joins the TPP, it needs to promote industrial restructuring. Small-scale farming constitutes the majority of Taiwan’s agricultural production and most farmers still use traditional farming methods. They use high volumes of chemical fertilizer and pesticides, and the slightest negligence is likely to lead to food safety issues.

Therefore, the public needs to be educated on agricultural issues. The government needs to use public information and online technology to set up dialogue between the producers and consumers, and remove the middlemen so that prices become more reasonable.

At the same time, consumers should be encouraged to pay higher prices to purchase agricultural products produced in environmentally-friendly ways.

In addition, economic incentives should be used to bring about a substantial increase in the ratio of land-friendly farming methods. After all, no matter how tasty food is, consumers are not likely to buy it if they have concerns about food safety.

These are some of the ways that farmers could respond to cheaper, but less safe imported products that would enter the nation as a result of free-trade agreements.

Second, there is a need to increase industrial competitiveness. In the government’s annual agricultural budget of more than NT$100 billion (US$3.07 billion), up to 60 to 70 percent is paid out to farmers as welfare benefits, crowding out other agricultural policies.

In this year’s budget, between 20 to 50 percent is being used for agricultural development, while the money allocated for agricultural research is even lower. This is far less than agriculturally advanced nations, which slows the pace of agricultural restructuring and is useless in raising farmers’ incomes.

Given that science and technology are key to Taiwan’s agricultural transformation, the government should review the budget, increase funding for industrial research and development — including encouraging research and development among farmers themselves — so that the limited funds have a maximum multiplier effect.

Furthermore, to make progress in structural adjustments, in addition to accelerating generational change in rural areas, a joint farming system should be introduced. That would allow older farmers to keep their farmland and choose their partners by contracting their land to, for example, cooperatives, production and marketing groups, agricultural enterprises or high efficiency farmers. This would help elderly farmers to grow cash crops that are encouraged by the government. The farmers would receive subsidies and the cash crops would yield dividends after harvest. The farmers would not need to worry, as they do now, about a supply and demand imbalance.

Finally, in the past, to cope with accession to the WTO, government departments allocated hundreds of billions of New Taiwan dollars in bailout funds to cover the losses resulting from agricultural imports. Although this was partially effective, it did not have the desired effects on the adjustment of industrial structure, improving agricultural competitiveness, increasing farmers’ income, reinforcing the agricultural labor force and so on.

In-depth review is needed to bring improvements, such as financial management and control, to avoid making the same mistakes again.

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

Translated by Clare Lear