A Raw Deal For Rice

Posted: 16 November 2004

DR-CAFTA Threatens Central American Farmers Already in Poverty

WASHINGTON, DC (November 16, 2004)—International agency Oxfam warned that the Free Trade Agreement between the United States and Central American countries together with the Dominican Republic (DR-CAFTA) endangers the livelihood of thousands of small farmers who already live in poverty.

Today, Oxfam released a new report, A Raw Deal For Rice Under DR-CAFTA, based on independent research, which exposes how the free trade agreement could devastate Central American rice farmers by opening the region's borders to massively subsidized US rice exports. The trade agreement is expected to come up for a vote in the US Congress early in 2005.

"There's a great potential for trade to reduce poverty in developing countries, but DR-CAFTA would be a serious blow to Central America's small agricultural producers, especially in rural areas where 60 percent of poor people are concentrated," said Stephanie Weinberg, Trade Policy Advisor at Oxfam. "DR-CAFTA is a bad deal for countries in the region as long as it exposes farmers to unfair competition from subsidized US exports and denies them the right to protect themselves from such export dumping."

The US rice industry receives more than one billion dollars in government subsidies each year, an amount greater than Nicaragua's entire national budget. This amount is also far more than the U.S. crop's total value, which in 2002 was estimated at 844 million dollars.

The free trade agreement will require countries in Central America to rapidly lower import tariffs on agricultural products, including rice. Oxfam looked at the experience of Honduras, which opted to rapidly eliminate protections for its rice producers in the early 1990s. As a result, Honduras was flooded with cheap US imports and Honduran rice production collapsed. The number of Honduran rice producers fell from 25,000 to fewer than 2,000, employment from rice dropped from 150,000 to fewer than 11,200 jobs, production contracted by 86 percent and foreign currency spending on rice imports jumped from one million to more than 20 million dollars annually. Consumers didn't benefit from lower prices either: they actually paid 12 percent more for rice in dollar terms.

"Sinking rice prices [paid to farmers] due to massive imports from the United States had a terrible impact on us: it was like Hurricane Mitch," said Maria Angeles Amaya, a farmer from Santa Cruz de Yojoa in Honduras. "My husband had to go to the United States for years, and we survived with the money he sent."

There are an estimated 80,000 rice producers in Central America and the Dominican Republic, and 1.5 million jobs depend on rice production. Rice has become a strategic crop for most of the countries in the region as it is an essential part of the basic diet, along with corn and beans.

"Instead of establishing fair and equitable rules for trade, the DR-CAFTA will institutionalize an uneven playing field that will leave thousands of small farmers in the region without protection even for their basic food crops," continued Weinberg. The case of Honduras shows that consumers may not benefit either."

Despite the public image that US farm subsidies go to help the family farmer, the new report points out that the system of supports for rice provides highly concentrated benefits for the largest industrial-sized producers: 80% of beneficiaries receive only 15% of supports.

Oxfam believes that agricultural trade can help reduce poverty if it is governed by a system of rules that are fair. The organization has supported the effort to reject the DR-CAFTA by encouraging thousands of US citizens to express their concerns to their Members of Congress. Oxfam's partners in Central America have mobilized across the region to demonstrate their opposition to DR-CAFTA to their elected officials. Oxfam calls on political leaders to carefully weigh the projected benefits of new trade agreements against the serious risks they pose for millions of the most vulnerable citizens.