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The role of the private sector and trade ....
ActionAid contends that the private sector, and in particular the increasing
control of agriculture by TNCs, has become a major obstacle to poverty
reduction.
Intellectual property
Intellectual property rights are one tool used to consolidate control in the
hands of the property holder. Intellectual property rights are being
universalised through the TRIPS Agreement of the World Trade Organisation. The
introduction of intellectual property laws on plants and seeds through the
TRIPS Agreement has serious implications for the 1.4 billion farmers worldwide
who rely on farm saved seed.
The independent commission on intellectual property rights set up by DFID was a
welcome first step in re-examining the UK government's policy on intellectual
property rights and its impact on developing countries and food security.
However, a wealth of evidence already exists highlighting that corporations and
individuals are taking plants from the fields of developing countries - and in
many cases these plants are staple food crops of the world's poor - and being
granted exclusive legal rights to them in the form of patents. 98 per cent of
the global market for patented genetically modified crops is held by just six
companies - and these corporations now hold over 900 patents on the world's
staple food crops such as rice, wheat, maize and sorgum, crops that are vital
for the poor. These patents also fail to recognise community rights and
indigenous knowledge. This knowledge is often considered a collective resource
and is sometimes held orally and not codified - leaving it open to
biopiracy.[1] <outbind://55/#_ftn1>
However, this corporate control extends even further. These same corporations
control 70 per cent of the global pesticide market and 30 per cent of the
global seed market. Corporations are paying premium prices to acquire local
seed companies in developing counties in anticipation of monopoly rents once
intellectual property rights are fully enforced. If this trend continues,
patents and other forms of intellectual property protection will decrease
farmers' access to seed, increase the loss of genetic resources, prevent seed
sharing and potentially put farmers out of business. Biodiversity is clearly
being lost as farmers are drawn into seed markets that are closely associated
with the economies of scale created by mono cropping. It is clearly in the
interests of TNCs to market fewer, genetically uniform varieties. With the
expansion of commercial seed markets at a global scale, so traditional
varieties are declining. This is compounded, for example, by farmer education
programmes that promote high yield varieties.
Any intellectual property system developed nationally or internationally must,
at a minimum, acknowledge and respect the following three positions:
* No patents on life
* Protection of Farmers' Rights to save, use, exchange and sell farm
saved seed
* Ensure that the provisions of TRIPS are consistent with the CBD
provisions on prior informed consent and equitable benefit sharing, as well as
FAO's International Treaty on Plant Genetic Resources.
Finally, investing in farmer-controlled seed development, production and
preservation systems that take into account local climatic, social and economic
situations can effectively reduce the threat posed by TRIPS.
Concentration, competition and supply chains
Farmers are also facing high levels of concentration in the trading,
manufacturing and retailing stages of the 'agrifood' chain. An unchecked trend
towards vertical integration and vertical coordination is allowing commodity
buyers to exert downward pressure on producer prices. Industry analysts have
shown how vertical integration and coordination is having market-distorting
effects by limiting the opportunity for price discovery, and by allowing the
dominant firms to dictate which producers and companies can participate in
markets, and on which terms. In many developing countries, 'buyer-driven'
supply chains are replacing traditional wholesale markets. Smallholder access
to both types of market is narrowing as they lack the capacity to meet the
stringent quality and volume criteria demanded by corporate buyers, and at the
same time are losing access to shrinking wholesale markets.
According to UNCTAD, agrifood firms are making 'super-profits' at the expense
of poor producers. While the savings that firms make from paying producers
below competitive rates are sometimes passed on to consumers in developed
countries to gain market share, in many cases consumers have not seen a fall in
retail prices despite the collapse of commodity prices. But whether companies
or consumers benefit, the implication is that huge rents are being transferred
from South to North. A World Bank study claims that diverging farm-retail
spreads are costing developing countries up to $100 billion a year, and that
industry concentration is a key factor. Analysts have also pointed out that the
dominance of Northern-owned firms is constraining developing country
agro-enterprises from entering agrifood markets, as well as move into the
value-added stages of the chain. UNCTAD states these market structures are
helping to reinforce the cycle of dependency, economic stagnation and extreme
poverty in poor countries.
ActionAid believes that public policy has a key role to play in maximising the
benefits yet minimising the negative effects of TNC activities. DFID and HMG
should support the establishment - outside the WTO - of legally binding and
complementary multilateral regulation of investment, competition and the
private sector to control the activities and market power of TNCs. Such
regulation must ensure that the activities of TNCs are conducive to promoting
development, eradicating poverty, protection of public goods/interests and
realising the rights of people.
In the regulation of FDI, countries should be afforded the necessary policy
space - if necessary through discriminatory polices - to enable an investment
climate that is conducive to promoting development and eradicating poverty and
the rights of investors should be balanced against the responsibilities and
obligations of investors and of their home governments.
Should the following similar core principles govern national and multilateral
competition policy and overseen by an international competition authority
(these are presented for consideration and discussion rather than concrete
ActionAid positions)?
* Provide sufficient policy space to ensure a climate that is conducive
to promoting development, eradicating poverty, protection of public goods and
realising the rights of people. For example, taking into account broader
'public interest' objectives so that it promotes sustainable development - such
as the promotion and the safeguard of small enterprises/producers,
technological development and greater employment and export promotion.
* Balance the concept of economic efficiency with economic equity (which
would incorporate a redefined concept of the 'public interest')[2]
<outbind://55/#_ftn2>
* Address the problems arising from increasing buyer-power - and
recognise that the traditional policy focus on seller power and consumer
welfare is inadequate;
* Engender growth by fostering the concentration of local enterprises and
their competitiveness (pro-competitiveness policies). The provision of
discriminatory policies and support (to infant industries for example) would be
permitted.
* Place obligations on foreign firms to the host country and an
obligation of the home country to ensure these firms fulfil their
responsibilities.
DFID and the UK Government should work with the EU and other inter-governmental
bodies to establish international standards for engagement between agrifood
TNCs and primary producers (this should balance the requirements of buyers with
the demands of suppliers, particularly small-scale producers). This could
include tackling the issues of excessively high input and low farm gate prices,
the exclusion of smallholders from supply chains, and unfair trading practices.
This may involve working with all stakeholders to find creative solutions, and
using tools such as existing models for supply chain regulation, food quality,
safety and procurement standards, contract law, competition policy, fair trade
principles, and supply management.
Overall, despite the progressive attitude of some companies to corporate
responsibility and self-regulation, most companies want to avoid environmental
and social regulation since this is perceived to add to their costs. ActionAid
believes that the voluntary approach has failed to deliver the commitment
required by corporations.
The state - either at the national or local level - should be the primary
service regulator for corporate control. But multinational companies require
international oversight. There is an important need to include international
regulation that would complement national (local) law. Yet binding
international regulatory framework(s) on multinational corporations - that
assist national governments to reinforce the role of the state to control the
behavior of corporations - also require enforcement. We encourage the UK
Government, possibly along with UN agencies, to take the lead in identifying an
appropriate forum, with the authority and competence to carry out this task.
________________________________
[1] <outbind://55/#_ftnref1> ActionAid, 2001. Crops and Robbers: How Patents
Jeopardise Global Food Security. ActionAid, UK.
[2] <outbind://55/#_ftnref2> The notion of the public interest has some
relevance to competition law - but has traditionally been narrowly defined and
is of secondary importance when compared to other competition considerations.
However, redefining the public interest offers the potential to promote
sustainable development. South Africa's new competition policy, in part,
embraces the principle of economic equity: "a fundamental principle of
competition policy and law in South Africa balances the need for economic
efficiency with socio-economic equity and development." Here the public
interest is more broadly defined and includes provisions for example "to ensure
that small and medium-sized enterprises have an equitable opportunity to
participate in the economy and to promote a greater spread of ownership, in
particular to increase the ownership stakes of historically disadvantaged
persons." (http://www.compcom.co.za/aboutus/aboutus_intro.asp?level=1)
Tim Rice
Food Rights Policy Officer
ActionAid International UK
Hamlyn House
MacDonald Road
London N19 5PG
Ph: 44 207 561 7560
ActionAid's vision is a world without poverty in which every person can
exercise their right to a life of dignity. Registered Charity No. 274467
www.actionaid.org.uk
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