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Nov. 30, -0001

The Future of Asian Farms under Wto

The Food Outlook in Asia

Maintaining a secure and sufficient food supply is the major duty of every government. For many years, Asian governments have been emphasizing self-sufficiency in staple foods, particularly rice. Over the past few decades, many countries have achieved self-sufficiency in staple foods, while some have even had to deal with the problem of a rice surplus.

Recently, the situation has changed dramatically. The WTO agreement has ushered in a new era of global free trade. Asian countries will not be able to protect their domestic markets from cheap imported food, and also will be restricted in giving subsidies and other production support to farmers.

Many Asian countries take a pessimistic view of the world's long-term food prospects. Populations are likely to keep rising, while we cannot expect the yield increases of the Green Revolution to continue into the future. Some increases are likely, but not to the extent of the past. The area of cultivated land cannot be expanded much further, and irrigated rice farming in particular is coming up against a yield barrier. Short supplies mean higher prices. In countries with a current food deficit, both the possible high cost of future imports, and future food security, have become a major concern.

Another very serious problem facing the region's agriculture is the future of family farms under a free trade system. Traditionally, Asian agriculture has been based on small farms run mainly by family labor. Small family farms are still the backbone of the region's farming. However, with the launch of the World Trade Organization (WTO), agricultural policies in each country are becoming market oriented. This will tend to favor large well-capitalized land holdings, and will be unfavorable to family farms. It is unclear whether family farms in their present form can survive trade liberalization. This international meeting served as a venue at which participants discussed how Asian countries can achieve food security under free trade, and what policies and programs might help family farms become more sustainable in a free trade environment.

Food Security under Wto

Most Asian countries have experienced severe food shortages in their histories and well into this century. Because of this experience, the question of food security arouses very deep concern in Asian countries. Many Asian economists feel that the WTO agreement will reduce the level of food security in most Asian countries, rather than increase it.

They fear that domestic production will be damaged by cheap imports, so that they will become dependent on imports of rice and other staple foods, with fluctuating stocks and prices. Obviously, food security is of greater concern to food importers (or potential importers), than it is to food exporters. To food exporters, a sudden fall in yield means only lower export earnings - maybe not even this, if world food stocks are low and prices high. For a food importer, a short-fall may mean shortages or even hunger at home.

It will be difficult for Asian countries, who have worked so hard to achieve self-sufficiency in rice, to maintain their success in the face of cheap imported rice. Under WTO, measures to promote domestic production and protect local farmers, such as subsidies and price supports, will be substantially restricted. No-one knows what level of domestic rice production will remain viable and survive.

However, another point of view is more optimistic: it suggests that Asian countries under WTO will still have stable and sufficient rice supplies, even though they depend to some extent on imports. There is some evidence, from past price trends, that free trade will probably mean more stable world prices for staple foods. In the past, national governments had aimed at food self-sufficiency and insulated their markets, then suddenly made large purchases when domestic production fell short. This had the effect of shunting national instability onto world markets. Increased participation makes markets more stable, so if all countries participate in world markets, the level of instability should be small. Trying to maintain rice self-sufficiency on Asia's small farmsias perhaps not the best strategy, in that grain production is the area where small size is the greatest competitive disadvantage. Intensive farming such as fruit, vegetables and special crops is better suited to very small farms. Perhaps Asian countries should try to change their objective from being self-sufficient in rice, to being self-sufficient agricultural countries which import grain and export vegetables and other special crops.

It is generally agreed that food security for all must be the basis of any world agricultural trade system. Whether the WTOagreement will raise or lower world grain stocks and prices is a pragmatic question: what will happen to world market prices will be clear to everyone. If prices and stocks of rice and other grains do in fact become more stable, then many of the present fears about food security will be relieved, and Asian countries will probably become less anxious about being self-sufficient in rice.

Sustainability of the Family Farm

Social and Economic Contribution of Family Farms

Family farms in many Asian countries are felt to be part of the national history, and to embody important national values. They also have considerable environmental value. One estimate of the value of the environmental contribution of paddy fields in Japan and their function of water storage and soil conservation is 4,600 billion yen (US$ 42.2 billion), in addition to the economic value of the rice and other crops they produce. They make this important contribution by mitigating and preventing damage from floods and landslide, as well as holding and storing rainwater to provide a steady and stable supply of groundwater, plus the nutrient recycling and recreational value.

Furthermore, small family farms tend to make intensive use of available family labor. This is very useful, if industry has not yet developed enough to absorb any labor surplus. Family farms thus help reduce urban problems such as squatter settlements. To the extent that surplus labor is maintained on the family farm, the farm could be seen as contributing to the whole economy.

Some countries, including the Philippines, prohibit the conversion of irrigated rice land, although upland fields may be sold for non-agricultural use. There is little demand for agricultural land that cannot be converted to other uses. Rice farmers very much resent this restriction, which they see as an unfair devaluation of the price they could get for their land.

Another view of the sustainability of small farms emphasizes that small farms necessarily mean low incomes, since the farmer has only a small quantity of resources at his disposal. According to this viewpoint, if Asian countries want to preserve very small family farms, with an average size in some countries of only one hectare, then either farmers must remain comparatively poor, or money must be channeled to them in other ways.

Increasing Farm Incomes

For family farms to be sustainable they must be profitable, not only in absolute terms, but also in relation to other types of livelihood available to farmers. All Asian countries are undergoing industrialization, although at different speeds, and one common pattern is that urban incomes are increasing much faster than farm incomes. The WTO agreement, by opening Asia's domestic markets to cheap produce from abroad, is likely to damage farm incomes in many Asian countries.

Direct income support to farmers is allowed under WTO, although there are problems in implementing this. One problem is that income support is particularly needed by farmers on relatively poor or marginal land, such as paddy farmers on steep terraced hillsides. However, it would be difficult to explain to farmers in more fertile areas why they should not also receive an income supplement.

Agricultural tourism and organic farming are both important as new sources of farm income. In agricultural tourism, city dwellers come and stay on farms, either in the farmhouse or in purpose built accommodation nearby. Although this is done as a vacation, city people often like to share in the farm work, and help with planting, harvesting etc. Both Japan and Korea are developing programs to provide low-interest loans to full-time farmers, to help them improve their accommodation facilities for tourists. Agricultural tourism, or "green tourism", not only meets the need of city people for a quiet, healthy natural environment, but is a way of channeling urban wealth into rural areas.

Food quality is also important. In the past, the focus was on quantity and high yields. The emphasis now must be on quality, to meet the urban demand for safe, healthy food with an excellent flavor. The organic farming movement is part of this trend.


There cannot be a single answer to the problems raised by the WTO agreement. Each country will have to seek its own solutions. Agriculture in some Asian countries will probably benefit directly from WTO. Thailand and Malaysia, both major exporters of agricultural products, are expected to benefit, as are countries such as Vietnam and Cambodia. In these countries, an important policy objective is to help marginal farmers with low incomes, and achieve a more equitable income distribution in rural and urban areas. At the moment, industrial development is benefitting only part of the population, while low-income farmers are being left behind.

Other countries, such as Korea and Japan, will have to adapt considerably to maintain a viable agriculture. However, even if there had been no WTO agreement, the aging farm populations in these countries, and the income gap between rural and urban people, could have been expected to bring about a considerable change in the structure of agriculture over the next few decades.

The extent to which Asian countries will solve problems of food security by higher imports of staple foods, particularly rice, will probably depend largely on price levels and availability on world markets. Opinions vary as to whether prices and stocks will stabilize under WTO. Asia's huge livestock industry could perhaps be seen as a buffer, in that in the event of a grain shortfall, feed grain could be diverted to human consumption. Most Asian countries, accustomed to viewing food security in terms of rice self-sufficiency, are very worried about any fall in their domestic rice production. However, free trade may mean greater food security for all, since it will give all countries access to sufficient food stocks at stable prices.

Asia's family farms are culturally and socially valuable, but economically vulnerable. We must keep in mind that economies are made to serve people, not the other way around, and agricultural policy should reflect social needs. Economic models are not suited to taking into account non-economic factors. For example, on family farms there is close contact between children and old people. This promotes social stability and reduces the number of broken families, and thus the rate of crime and mental illness. This saving is not taken into account in economic models, and yet is important in view of the high cost, both direct and indirect, of crime and mental illness in Western countries. The more stable social structures in Asia, of which family farms are part, are thus of great economic importance, but are not counted in economic statements of costs and returns.

FFTC International Seminar

Food Production and the Economic Sustainability of Family Farms in an Open Market Situation

Seoul, Korea

September 16-21 1996

No. Participating Countries:
8 (Indonesia, Japan, Korea, Malaysia, Philippines, Taiwan ROC, Thailand, USA)

No. Papers:

No. Participants:
29 plus observers

National Agricultural Cooperative Federation, Korea

List of Papers

1. Global food production in the next century

- T. Kelley White

2. Structural changes in agriculture and implications to food security

- Doo-Bong Han and Seung-Ryong Yang

3. Vital roles to be played by family farms for food security in the coming century

- Hiroshi Usui

4. Food production and the role of family farms

- Leonardo Q. Montemayor

5. Agricultural Policy Reforms in Indonesia: Accelerating growth with equity

- Achmad Suryana

6. The agricultural situation and policy reforms in Korea- Young-Hyo Ha

7. The agricultural sector of Thailand and future prospects

- Kajonwan Itharattana

8. Malaysian smallholder agriculture under the National Agricultural Policy- Siti Badariah Saiful Nathan

9. Farmers' household economy in China: Situation and prospects

- Qi-Jie Gao

10. Policy measures for fostering small family farms in the Republic of China

- Fu-Shan Liu

11. The GATT Uruguay Round agreement: Implications for small farms in the Philippines

- Minda C. Mangabat

12. Food production and the economic sustainability of family farms in Korea

- Shil Kwan Lee

13. Semi-organic farming as a practical alternative- Yoshiko Yoshida

14. Green tourism in Japan

- Mitsuhiro Yamazaki

15. Rural tourism in Korea

- Jung-Joo Kim

Index of Images

Figure 1 Small Family Farm Producing Cabbage

Figure 1 Small Family Farm Producing Cabbage

Figure 2 Father and Son Take Cabbages to Market

Figure 2 Father and Son Take Cabbages to Market

Figure 3 Small Rice Transplanter for One-Hectare Farm

Figure 3 Small Rice Transplanter for One-Hectare Farm

Figure 4 Traditional Rice Planting by Hand

Figure 4 Traditional Rice Planting by Hand

Figure 5 Combine Harvester for Rice Is Large by Asian Standards, but Small by Western Ones.

Figure 5 Combine Harvester for Rice Is Large by Asian Standards, but Small by Western Ones.

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