by Daniel Pruzin, International Trade Daily

GENEVA--Boosting global trade in agricultural goods could have "potentially devastating" impacts on the environment, and governments need to be vigilant in putting proper safeguards in place, a United Nations agency warned Sept. 20.

In a statement accompanying the release of five country reports examining the impacts of trade liberalization in the rice sector, the U.N. Environment program (UNEP) said free trade agreements that fail to take account of environmental considerations could result in negative outcomes such as soil degradation, water pollution, and loss of biodiversity.

The studies--focusing on recent developments in Colombia, Indonesia, Nigeria, Senegal, and Vietnam--conclude that the overall impact of trade liberalization in the rice sector has been negative where appropriate policies have not been put into place.

A sixth report focusing on China has not yet been made public. "The environmental impacts of increased trade in agricultural products are potentially devastating, and countries must urgently establish policies to protect their natural resources as well as those that enable them to reap the economic and social benefits," UNEP declared.

Warning Before Hong Kong Meeting

The UNEP warning comes three months before a critical World Trade Organization ministerial meeting in Hong Kong where member governments are expected to agree on the elements of a global deal for reducing tariffs on agricultural goods and cutting farm subsidies.

"It is critical that we get an agreement in Hong Kong and from the Doha Round that frees up agricultural markets for poorer countries, but this should not come at the expense of the natural environment," declared UNEP Executive Director Klaus Toepfer.

A final Doha Round deal will also address trade and environment issues, but the agenda is limited to three issues: examining the relationship between existing WTO rules and specific trade obligations set out under multilateral environment agreements (MEAs); setting out procedures for regular information exchanges between MEA secretariats and relevant WTO committees; and reducing or eliminating tariff and nontariff barriers on environmental goods and services.

UNEP said it was focusing on the rice sector due to its importance in many countries in terms of food security, poverty reduction, and environmental impacts.

Local Producers Lose Out

Overall, the U.N. environment agency said, the main "winners" from trade liberalization were importers, middlemen, and large-scale producers, while the "losers" tended to be local producers, particularly small-scale farmers, whose income has declined. UNEP also said consumers were losers in some cases, since the rice trading cartels often did not pass on price reductions to the end buyers.

In its report on Indonesia, UNEP noted that reforms undertaken in line with the country's WTO commitments have led to an increase in cheaper imported rice and a decline in domestic prices. Indonesia also took on commitments to reduce and abolish subsidies on inputs such as pesticides and fertilizers, which drove up costs for domestic producers. The Indonesian government subsequently reintroduced tariffs for imported rice in an effort to protect local production, "but on the whole, trade liberalization has increased Indonesia's import dependency on rice, decreased its self-sufficiency ratio and generally affected rice production in Java," the country's most populous island, UNEP said.

In terms of environmental impact, UNEP said declining revenues have pushed farmers in Java to convert their agricultural land for the other purposes such as housing, manufacturing, and roads. Between 1990 and 2000, the average annual rate of land conversion from rice fields to other uses was around 6.91 per cent.

"If this trend were to continue at the same rate it is estimated that in less than 20 years the whole of Java's agricultural land would be converted to non-agricultural uses, e.g. housing, offices, schools, shops and manufacturing plants," UNEP added.

More Use of Chemicals in Vietnam

In its report on Vietnam, UNEP said trade liberalization and reforms have resulted in significant economic improvements, with increases in rice prices and the boom in rice production and exports boosting rural economies. Vietnam is one of the world's leading rice exporters and is currently negotiating the terms for its entry into the WTO.

On the negative side, the increase in the price of rice and a corresponding decrease in the price of agrochemicals have resulted in more intensive use of chemical fertilizers, contributing to soil degradation, water pollution, loss of agrobiodiversity, and a decline in aquatic habitat and freshwater fishery harvests. In addition, the expansion of rice cultivation poses a risk to remaining forests and
wetlands that are rich in biodiversity.

"All of these environmental impacts will sooner or later incur economic costs for water purification, soil rehabilitation, health treatment, increasing natural calamities, etc.," UNEP warned.

Copies of the UNEP country reports, "Integrated Assessment of the Impact of Trade Liberalization," are available on the UNEP Web site at http://www.unep.ch/etb/publications/riceStudies.php.