EFTA Fair Trade Yearbook 1997

January 1998

Rice

A new challenge for fair trade

Elisabeth Piras

Rice - more than just a useful plant!

Rice, (the name comes from the Tamil word "arisi"), is the most important cereal in the world. This aquatic grass ("Oryza sativa") originated from China where, as early as the 5th millenium BC, it was cultivated on the banks of the Blue River in the Yangzi Delta. It has since spread all over Asia and into Africa. In the wake of Alexander the Great's expedition to India, it arrived in the near East and countries bordering the Mediterranean. It crossed the Atlantic too, and became acclimatized first in South America and then in the North.

Rice can grow in many different climates - hot or cold, wet or dry, from sea level to altitudes of 2,500m.

Asian countries have always been both the main producers and consumers of rice and it is still the staple food for more than half the world's population. However as the influence of affluent industrialized countries and their accompanying nutritional habits spreads across the globe, it seems likely that rice will lose ground in the face of the growing consumption of meat. Nevertheless rice will, for the foreseeable future, continue to play an important role in man's nutritional security.

In traditional communities, rice is more than just an important foodstuff and a useful plant. This is apparent in the language. In many Asiatic languages, "to eat" means "to eat rice". Innumerable terms and nuances specify the different kinds of rice, its cultivation and its processing. As a life-giving element, as a godsend and even as a plant of divine origin, it is the central point of numerous rites and ceremonies in many cultures.

Traditional varieties of rice have recently come under threat from market forces. However, in many places, there is a deliberate move to cultivate and preserve the old varieties, for they both strengthen cultural and social identity, and provide a signal that modern (genetic) techniques do not provide all the answers.

Under the banner of diversity

Rice is not a standard product. There are innumerable species and a variety of cultivation methods as well as several different commercial categories.

The extraordinary bio-diversity of the species is legendary. The old Indian Vedes record the existence of more than 500,000 species; and in Asia before the Second World War there were still some 100,000 known species. The International Rice Research Institute (IRRI) in the Philippines keeps a bank of approximately 86,000 species from 113 countries. However, this astonishing variety of species is now under threat: The "Green Revolution" (see panel) encouraging the use of high-yield species and the consequent genetic impoverishment of the seed has already caused substantial species loss. The world market contributes to this trend by trading almost exclusively in three kinds of rice: long grain Indica, short grain Japonica, and perfumed rice (Basmati from India and Pakistan, and jasmin from Thailand).

Rice covers 11% of the world's arable soil. 90% of rice fields are in Asia, producing 92% of the global yield. The rest comes from Africa, North and South America and five EU countries (Italy, Spain, Portugal, France, and Greece).

Rice, originally a marsh plant, can also grow in arid areas. However, in order to thrive, it needs adequate irrigation. It was originally cultivated on alluvial land and river deltas, or in stagnant or flowing water. This method, exploiting natural irrigation, is still used in 32% of all rice production, particularly in South and South-East Asia.

Over the centuries, rice farmers developed the wet cultivation method using water enclosed by banks. Water levels within these enclosures can be adjusted by a variety of irrigation systems. Within the scope of the "Green Revolution", artificial irrigation was developed further and expanded, using modern technologies. Today, more than half of the world's rice fields (60% of them in Asia) have artificial irrigation. Modern irrigation systems allow perfect control of the water level and thus a much higher yield. However, the resulting environmental damage, which is often irrevocable, is substantial. Furthermore, modern irrigation plants are so costly that, in the South, only rich landowners can afford them. Rice from Europe and North America comes almost exclusively from fields with artificial irrigation.

A third method, the so-called dry cultivation method, where water is supplied only by rainfall, prevails in Africa (42% of the rice fields) and South America (60%). At present, 13% of the world's rice fields depend on natural precipitation.

There are several quality and price categories on the market, ranging from high quality luxury rice to broken rice which is used for the food industry, as fodder, or as cheap food for needy people. There are three further categories which depend on the processing stage. "Paddy" is rice grain with awn as well as husk, wholegrain rice has husk but no awn, and white rice is husked and polished and as a result has little nutritive value.

Rice farmers from buffalos to helicopters

Rice farmers fall into two main groups.

In the South, the - often terraced - rice fields are mostly cultivated by small farmers. Thousands of families grow rice exclusively for their own use. They may plan to earn a bit of money by selling the surplus, but are often forced to sell their whole yield through their need for cash. All family members are involved in the production process. Some tasks, like the setting of the young plants, are done by hand; others, like the tillage, are done with the help of draught animals. Even in the big fields belonging to rich landowners, the work is done by hand by cheap seasonal labour, (consisting of landless people and small-scale farmers), and also uses animals.

In total contrast, rice production in the USA is highly mechanized. In the large fields belonging to farmers or food corporations, the work is done using ultra-modern machines, electronic instruments and helicopters.

In Europe, the work is generally mechanised but, in some places, intensive manual labour is still common. However, the American model is gaining ground rapidly under pressure from productivity and competition. On both sides of the Atlantic, rice farmers can claim compensation payments. In America the "deficiency payment" and in the European Union the "intervention price" assure farmers a guaranteed income as well as access to the national and international markets.

Rising world production and dwindling reserves

In 1965, total world production amounted to 257 million tonnes of Paddy. Since 1995, rice has been the world's most important cereal. (554 million tonnes of Paddy, compared with wheat at 538 million tonnes and maize at 506 million tonnes). The estimated production of rice for 1996 is 565.8 million tonnes. How can this astonishing expansion be explained?

In most Asian countries, rice is the staple food. After World War II, and especially in the 1960s, several governments subsidised the expansion of the production and marketing of rice, sometimes even introducing state monopolies. This was, and is, both a guarantee of national self-sufficiancy and a means of promoting the export of surplusses - a useful, if not always necessary, foreign currency source. Furthermore, in several production areas, the climatic conditions were favourable. Indonesia, for example, which had been the world's biggest rice importer, was able to export rice for some time, until the crop failure in 1995.

Global rice reserves which are generally insufficient, have been declining for some time. In 1996, they only covered about 16% of the estimated total demand, (representing a reserve of only 57 days compared with that of wheat which is 70 days). If densely-populated countries like China or India, which today account for 30% and 22% of global production respectively, were unable to meet their own needs, the extra demand could not be met, since internationally traded rice represents only between 4 and 5% of world production.

In spite of substantial expansion, global production is not yet sufficient. According to an IRRI study, in view of the high growth rate of the world population, rice production would have to increase by 70% by the year 2020! Consequently, IRRI, an eager advocate of the Green Revolution is developing a 'super-grain' which is expected to yield between 10 and 15 tonnes per hectare. The present average yield with artificial irrigation is only 3.7 tonnes!

In contrast, a sustainable development study recommends the promotion of dry cultivation. According to this future vision, South America with around 230 million hectares of arable land could become the rice granary of the world.

The international rice market: narrow and unsettled

The important exporting countries are not the same as the important producer countries (see table). Thailand has, for many years, been the main exporter, although recently other Asian countries, especially Vietnam, have been in contention for this position. In view of this competition, Thailand has been forced to maintain its subsidy policy. In 1997, about one quarter of its rice exports will have to be subsidised. The USA occupied second position for a long time, but has recently been overtaken by other countries, despite also having large subsidised exports (50 to 70% of national production).

As rice - with exception of the USA - is mainly consumed in the producing countries themselves, only between 4 and 5% of global production is traded internationally. (Equivalent figures for wheat and maize are 20% and 18% respectively). Indeed, the international rice market is a special case: it is a narrow surplus market, ruled by the geographical concentration of production, a relatively small number of traders and buyers, and a price that reacts quite moderately to quantity and quality variations of the available rice. The rice market, however, is not just narrow, but it is also especially unsettled, for several reasons:

In spite of these irregularities, there are some identifiable trends. The main importers are the Arabian and to a lesser extent the Asian countries, absorbing together more than half of the internationally traded quantities. Africa seems to have become the main rice importer with 25% of internationally traded rice going to the African continent - especially the sub-Saharan regions. This rice is mainly of low quality and includes cheap broken rice.

Rice: also a European product!

In Europe, there are five rice-producing countries: Italy, Spain, France, Portugal, and Greece. In 1992/93 (latest available European statistics), 62% of the production came from Italy (Piemont), around 18% from Spain (Andalusia and Murcia), 6% each from France (Camargue) and Portugal, and 8% from Greece. In 1994, European production satisfied approximately 60 % of EU demand. At present, the production of long grain Indica rice is insufficient, whereas there is a surplus of round grain Japonica. This latter is almost exclusively of Italian origin and is exported. 30% of the deficiency of long grain rice is imported from the USA (accounting for some 15% of their exports), 20% from Thailand, 7% from India and Pakistan and 33% from the ACP countries and the Dutch Antilles. Between 1990 and 1994, 4.7% of all imports were destined for the EU.

The European market: hurdles and obstacles

The cultivation of rice could expand in different European regions without major difficulty. Rice imports, however, have to overcome numerous tariff and non-tariff barriers, according to the country of origin and the quality of the commodity. The EU aims, not only to support its domestic production by means of intervention prices, but also to protect the European processing industries. On the one hand, the import of Paddy rice is favoured, and on the other, duties on white rice are much higher than for wholegrain rice.

Furthermore, European import regulations are characterized by a great number of sophisticated exceptions. The ACP countries, for example, are granted preferential duties. In spite of this, certain countries export via the Dutch Antilles (which do not produce, but only process rice). They thus profit from the exemption from duty which the Antilles enjoys as a European overseas territory and avoid the Lom Convention, according to which they would have to take export tax from the rice farmers.

On the basis of WTO (World Trade Organization) regulations, there will need to be some changes in the European rice market, but there have been none hitherto.

WTO, globalization and transnational corporations: who are the winners?

The final convention of the Uruguay Round of GATT in 1994 stated that export subsidies - which have disadvantaged Southern countries in international competition and which have often had a negative impact on the interests of local agriculture - must be progressively reduced. For certain Southern countries, these regulations do not become effective yet, and the least-developed countries are completely exempt from compliance. Furthermore, within this liberalization policy, considerable reductions of secondary obstacles were agreed - whereby certain non-tariff barriers are to be replaced by tariff barriers. Besides, the member states will have to guarantee minimum access to their domestic market. The regulations mentioned above, will come into effect progressively, meaning that they will be of benefit to only a few countries in the short-term.

The following facts are worthy of mention. Some protective measures which favour the production of certain industrialized countries are not affected by the new regulations - like the US regulation allowing the export of cereals for famine relief (Public Law 480). Japan meets exactly the prescribed minimum import volume for rice, while exporting most of it again in the form of relief exports. This means that Japan, although meeting its import obligations, has not really opened its market. At the same time, in 1996, there was an increase in Japanese rice exports.

In former times, rice was traded by states or by private export societies, which were mostly China-based. Over the last 20 years, transnational corporations have become important players. They now control about 40% of the rice trade and are steadily increasing their influence. The four most important corporations are Continental, Glencore and Cargill and the French group Riz et Denres. Their power position on the world market is increased, because, in some countries, they are also one of the most important suppliers of agrochemicals, or even the only one.

This neoliberal international trade system seems, inevitably to favour the interests of the industrialized countries and multinational corporations. It is therefore more necessary than ever, to strengthen the links between producers and consumers and to exercise pressure at the political level, against a development which so clearly favours only a few.

Fair traded rice - a contradiction?

One of the main objectives of fair trade is sustainable development. Can it have a role in the export of one of the most important basic foodstuffs? What about the nutritional security of the producers?

From nutritional security to nutritional sovereignty

The term of nutritional security originated from the General Declaration of Human Rights. It has been the subject of numerous discussions and publications, and at the world summit meeting of the FAO in Rome in November 1996, it was one of the most important issues.

According to the 1986 definition by the World Bank, nutritional security means the guarantee to all people of a steady access to the nourishment necessary to lead a healthy and active life. 'Steady access' means that foodstuffs have to be available as well as affordable.

Today, this declaration is still the crucial point of innumerable comments, corrections and addenda. In the meantime, the prevailing conclusion is that adequate production is necessary to defeat hunger, but is not sufficient to guarantee nutritional security. Therefore, it is not enough to control the production and marketing of a basic foodstuff. In India, for example, rice quantities are sufficient. However, there are urban and rural population groups who cannot afford to satisfy their basic nutritional needs. Consequently, the availability of foodstuffs is not as important as the guarantee of unlimited access to land, seeds and water. This requires sources of income generation, jobs, and social support programmes. Besides, quantity is no indication of food value. Quality is also an important criterion. From now on, in this chapter, the term 'quality' will refer to food whose production is sustainable with regard to the natural, social and cultural environment.

Farmers' organizations in the South and development organizations in the North have recently coined a new phrase - nutritional sovereignty. For them the central point is the right of the people to self-sufficiency and the right of countries to the independence to safeguard their economic and political autonomy particularly with regard to the food sector. In the name of this nutritional sovereignty and sustainable development, more and more organizations are standing up to the neoliberal WTO policies, which encourage the import of cheap agricultural products, thus promoting the ruin of domestic agriculture.

The reaction of fair trade

Fair trade works by the application of new methods at the edge of the world market but is, nevertheless, subject to the same laws as conventional trade. The trading partners require an export licence and are subject to export restrictions, despite the fact that the fairly traded quantities are tiny from the global point of view. Because the objectives of fair trade often conflict with the interests of intermediaries and of some people in political circles, it often finds itself cast in the role of troublemaker or even scapegoat. The trial against Oxfam-India speaks volumes (see panel).

Furthermore, within fair trade circles, sustainable development means what it says. It takes into account the nutritional circumstances of a region, and aims to open and secure access to food for the population groups in question. One of the priorities for all fair trading partners is the creation of steady sources of income. This usually involves the production of finished goods and local packaging to add value, and it is of course preferrable if this can be done in cooperation with processing, transport and export operations which also subscribe to the fair trade ethos. Fair trade supports, by a fair price policy and long-term business relationships, farmers who use or are planning to use ecological cultivation methods. It can thus give small farmers - the stepchildren of the agrochemical industry and the Green Revolution - the support they need to become self-sufficient.

Importing of rice according to these criteria, and its distribution through the European network of fair trade organizations (see panel 2), can make an important contribution to the nutritional sovereignty of the producers!

For EFTA members, however, this is not enough. They want to enable further groups of rice producers to enter the fair market. They also want to promote the manufacture of finished products like poprice, krupuk, paste foods made of rice flour, and other products for national and international markets. This would allow them to sell more rice while creating new processing co-operatives, income sources and jobs.

Fair trade rice: a new challenge?

Fair trade needs to be strengthened at the political level, too. For several years EFTA has been lobbying EU politicians, drawing their attention to fair trade principles and making proposals on issues like sustainable development, international trade relationships and consumer protection. Rice has yet to be discussed. It is, at present, not a priority for fair trade organizations like the Max Havelaar Foundation. Nevertheless, in 1995 and 1997, it was the focus of a campaign in Switzerland, supported by two national development organizations and EFTA member Claro, the importer of the first fair trade rice.

Nutritional sovereignty, protection of bio-diversity, genetic manipulation, patent protection at the cost of free access to seeds, (illegal) trade in pesticides and other chemicals, promotion of organic cultivation, WTO impacts, displacement of domestic agricultural products through imports (often in the guise of relief deliveries), support for big landowners at the expense of small farmers are all issues which relate directly to rice!

In Belgium, EFTA members Magasins du Monde Oxfam and Oxfam Wereldwinkels, together with Oxfam Solidarit initiated a national campaign in 1997 to educate both the public and political opinion about the issue of nutritional sovereignty. Issues of bio-technology, protection of genetic diversity, patent rights on seeds (see panel 4) are all well-illustrated by rice and rice production by small farmers. In support of the European campaigns, farmers' organizations from Asia, Africa and Latin America tell their own stories, explaining their point of view and claiming their rights. Nutritional sovereignty of rice farmers and consumers in both the South and the North is a major challenge for fair trade!

"Green" or sustainable Revolution?

The "Green Revolution" of the 1960s promised an end to famine. It introduced high-yield species, sophisticated irrigation systems, and the massive use of chemicals. It is true that, in some places, famine was avoided and in some countries - like India - enough cereals could be produced, to feed growing populations. However, the Green Revolution turned out to be much less green than expected and the social and environmental cost of its success has, without question, been too high. Because the new seeds need expensive pesticides and artificial fertilizers, as well as costly artificial irrigation, it has widened the gulf between poor small-scale farmers and rich landowners. Furthermore, the natural ecological balance which has existed for millenia has been totally destroyed by the chemical stimulants and remedies. Pesticides and excess fertilizer in the water in rice fields make parallel fish-farming impossible and threaten people's health. Ground water is being depleted (wet cultivation requires up to 5,000 litres of water to produce of 1 kg of rice!), soils are becoming salinated and depleted, and in the meantime, yields are declining. Following an initial spectacular boom, they have fallen by 30 % within the past few years.

There are two diametrically opposed ways out of this impasse. Supporters of modern farming, notably the IRRI and the transnational chemical corporations, are pinning their hopes on genetic manipulation and patents as well as on new high-yield species. Other voices in the North and the South - both scientists and farmers' organizations - believe that solutions lie in the reintroduction of traditional farming methods. Mixed crops and green manure would increase soil fertility, preserve traditional soil types, and produce local seed - thus creating the basis of a really green, (i.e. sustainable and self-determined), revolution!

Hunger is not an inescapable fate!

1997 saw the beginning of a trial against the development organization Oxfam-India. The accusations made by the federal state of Orissa are as follows: violation of the government prohibition of marketing the rice outside the district and exploitation of poor small-scale farmers in order to profit by transactions using foreign currency.

The Court has yet to make a decision on this matter. Oxfam-India, however, explains the background:

Oxfam-India, a non-profit non-governmental organization, has no commercial ambitions. On the contrary, it has been supporting a number of farmers' organization in Orissa since 1978. In this context, it cooperates, among others, with P.O.K.S., a federation which supports biological cultivation and the direct marketing of agricultural products in the West of the federal state.

As part of a campaign to raise public awareness of pesticide imports from industrialized countries and of the impact of the WTO on agriculture in India, P.O.K.S. is planning to export fourteen tonnes of ecologically produced rice to fair trade organizations in England and Belgium, with the support of Oxfam-India. An application was made for the legal approval of this export - whose volume was such as to have purely symbolic significance.

P.O.K.S. intends to use the profit from this export for a loan to build a mill, owned by the organization itself, where members can dehusk and polish their own rice. The marketing of processed rice not only brings financial advanta-ges to the producers, but more importantly, it gives them independence from the intermediaries, who control the market, dictate the prices, and grant loans at usurious rates of interest.

Because there is a prohibition on marketing the rice outside the district, the monopoly of the intermediaries is even more significant. In Kalahandi, one of the most fertile and productive zones of the Indian subcontinent, cereal surpluses have been achieved for over 20 years, (in spite of the 1996 drought). This year, all the farmers harvested more rice than they needed for their own use but, paradoxically, most of the families do not have enough to eat. How can this be?

P.O.K.S. and Oxfam-India are not afraid to state the facts: the trade restrictions benefit the rich traders. They buy the Paddy rice at low prices, have it processed and sell white rice back to the producers at lucrative prices. Furthermore, they export large quantities into other parts of the country were prices are higher. As the surplus does not create a sufficient income, the farmers are more and more often forced to sell their total crop, often including the rice they should keep for the next sowing.

Quite obviously, P.O.K.S. is a thorn in the flesh of the intermediaries, who have consolidated their power position even further, under the guise of response to a natural disaster. Once again, famine is a consequence not of natural forces, but of human injustice and political intrigue. This inevitably leads to the question as to whether the trial was initiated (and financed) by traders fearing for their privileges.

The first fair traded rice

The gap between rich and poor is growing particularly fast in Thailand. In several areas of the country, especially around Bangkok, the economy is booming through the introduction of 'special economic zones' and the influx of foreign investments.

In other regions, such as Surin in the north-east of Thailand, poverty, which is already endemic, is increasing further, resulting in increased migration to the cities. Severe environmental damage in this region has been caused both by the massive destruction of the rain forest and, to a lesser extent, by the Green Revolution which has resulted in depletion of ground water, frequent droughts, and exhausted soils.

Nevertheless, 90 % of the population, most of them small-scale farmer families, still try to live by subsistence farming, mostly rice cultivation. However, a lack of money, usually forces farmers to sell their rice, often before it is harvested, to intermediaries who also grant them credit at extortionate interest rates. Families are trapped in a vicious circle of debt which passes from generation to generation. Migration to urban regions is hardly a remedy, since many children and young people are forced into bonded labour and prostitution to pay their parents' debts.

Some Thai non-governmental organizations have, for many years, been trying to take measures to improve the ecological and social conditions of these small farmers. These measures have included the promotion of ecological rice cultivation using the Japanese Fukuoka method; processing of Paddy rice in mills owned by farmers' organizations; the foundation of rice banks; and the direct marketing of agricultural products to achieve higher prices. The overall aim is to free farmers from the debt cycle, assure self-sufficiency and access to seeds, as well as to improve soil fertility and rice productivity.

In this context, several farmer groups decided to export rice to fair trade organizations in Europe, supported by Thai non-governmental organizations and Claro, the Swiss EFTA member. It was not easy. Despite the liberalization of exports, licences are still reserved for the big trading companies. Furthermore, the hygiene standards and EU regulations are becoming ever more stringent. The necessary quality assurance can only be achieved with expensive technical equipment It also takes time to acquire the necessary knowledge and training.

After a long obstacle race, the green light has now been given to export rice. Also the aim of the eco-certification of rice, or rather the foundation of a Thai controlling body, has practically been achieved. Without the financial and technical support granted by fair trade, the international market would surely have remained inaccessible to the rice farmers of Surin!

Thanks to the efforts of all project partners in Thailand and Switzerland, Surin rice can now be produced in export quality, processed and packed on the spot, and distributed by fair trade networks in Europe. The export is done by the Nature Food Cooperative. Simultaneously, Green Net, a recently founded organization, is developing a national marketing network within Thailand itself.

Basmati made in USA

The fragrant Basmati rice has been produced on the Indian subcontinent from time immemorial. Recently, the term Basmati has been used for perfumed rice grown in USA, originally with Indian seedlings. Marketing is done by the US Grain Corporation, whose main share holders, Cargill and Continental, number among the four most important rice traders in the world. According to US law, the transnational corporation can claim a patent on Basmati rice and its exclusive rights! Indian farmers will have to pay licence fees to the patent holders if they want to sell their production as Basmati rice in the USA. Furthermore, they will no longer be allowed to grow their own seedlings - seedlings they have cultivated and improved themselves over the centuries. Is it any wonder that they are determined to combat this 'bio robbery' !

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