Virus Dumping

The man come to shake my hand / and rob me of my farm –Ryan Bingham

Dumping grain on another country is a classic maneuver in economic warfare.

When a country’s borders are opened by force or by choice, by structural adjustment or by neoliberal trade agreement, when tariffs and other forms of protectionism are finally scotched, heavily subsidized multinational agribusiness can flood the new market with commodities at prices less than their production costs.

That is, these companies are happy to sell their food stuffs abroad at a loss. That doesn’t make sense, you say. Aren’t these guys in business for profit? They are indeed. The deficits are in actuality a cold-blooded calculation.

The objective is to drive previously protected domestic sectors, unable to compete with that kind of pricing, out of business. Once the mom-and-pop competition is rubbed out Walmart-style, the multinationals, their competition cleared off the field, can impose what prices they please across a market they now dominate.

Tuft University’s Tim Wise recently reported that when the North America Free Trade Agreement opened  borders to commodity traffic Farm-Bill-backed U.S. agribusiness dumped eight goods on Mexico: corn, soybeans, wheat, rice, cotton, beef, pork, and poultry. Dumping margins–the gap between the cost of the item and its pricing–ranged from 12% to 38%, costing Mexican producers billions.

Corn proved the harshest,

Average dumping margins of 19% contributed to a 413% increase in U.S. exports and a 66% decline in real producer prices in Mexico from the early 1990s to 2005. The estimated cost to Mexican producers of dumping-level corn prices was $6.6 billion over the nine-year period, an average of $99 per hectare per year, or $38 per ton.

As we explored here and here with NAFTA Flu, what we named swine flu H1N1 (2009), the first new pandemic strain in forty years, Mexico’s meat industries, including the hog sector from which H1N1 may have emerged, were similarly marginalized by cheap imports. As Wise describes it,

Meats were exported at below-cost prices because U.S. producers benefited from below-cost soybeans and corn, key components in feed.  This so-called implicit subsidy to meat producers resulted in dumping margins of 5-10% on exported meat. This cost Mexican livestock producers who did not use imported feed an estimated $3.2 billion between 1997 and 2005. The largest losses were in beef, at $1.6 billion, or $175 million per year.

Commodity dumping permits more than a competitive advantage. It provides a foothold on the landscape itself. Virginia-based Smithfield Foods, whose Granjas Carroll subsidiary remains a prime suspect for the new influenza, was one of several foreign companies able to buy out or contract Mexican farmers who were weakened by the barrage of imports. Those local farmers who escaped the onslaught did so only by consolidating neighbors’ failing plots into mid-size domestics still able to stand up to their foreign competition.

Such tactics are part and parcel of a strategy aimed at making legality a matter of expediency than of principle, although that might be argued in its way a principle of sorts. One of at best dubious distinction.

When what is illegal at home in the U.S. is perfectly legal elsewhere, move your operations offshore. In many countries of the Global South, few labor laws and environmental regulations are on the books. For those that are, enforcement is lax or bribed away. On the other hand, when what is legal at home in the U.S. is banned elsewhere, move in U.S. rules. Subject other countries’ domestic operations to the kind of discipline of the invisible hand one’s own multinationals avoid like the plague. Impose a protectionism in reverse.

Roberto Saviano writes of the duality of the Neapolitan mafia, the Camorra, in similar terms,

It might seem that the clans, once they’ve accumulated substantial capital, would stop their criminal activities, unravel their genetic code somehow, and convert to legality. Just like the Kennedy family, who had earned enormous amounts selling liquor during Prohibition and later broke all criminal ties. But the strength of Italian criminal business lies precisely in maintaining a double track, in never renouncing its origins…

Various inquiries by the Naples Anti-Mafia Public Attorney’s Office revealed that when the…legal track was in crisis, the criminal one was immediately activated. If cash was short, they had counterfeit bills printed. They annihilated the competition through extortions and imported merchandise tax-free….[T]he legal economy means that clients get steady prices, bank credits are always honored, money continues to circulate, and products continue to be consumed…reduc[ing] the separation between the law and economic imperative, between what regulations prohibit and what making money demands.

In other words, make whatever works work, whatever the law of the land. In such a framework even grand failures are but new opportunities:

In a kind of bioeconomic warfare agribusiness can prosper when deadly influenza strains originating from their own operations spread out to their smaller competition.

No conspiracy theory need apply. No virus engineered in a laboratory. No conscious acts of espionage or sabotage. Rather we have here an emergent neglect from the moral hazard that arises when the costs of intensive husbandry are externalized.

The financial tab for these outbreaks is routinely picked up by governments and taxpayers worldwide. So why should agribusiness bother with ending practices that repeatedly interrupt economies and will someday produce a virus that kills hundreds of millions of people? Companies are often compelled to invest in livestock vaccination and biosecurity–however incomplete–but if the full costs of outbreaks were placed on their balance sheets larger operations as we know them would cease to exist.

Corporate farms are also able to skirt the economic punishments of the outbreaks they cause by their horizontal integration. They can weather the resulting bad publicity and intermittent breaks in their commodity chains by increasing production in affiliates elsewhere.

Thailand’s CP Group operates joint-venture poultry facilities across China, producing as of 2005 600 million of China’s 2.2 billion chickens annually sold. When an outbreak of bird flu occurred in a farm operated by the CP Group in Heilongjiang Province, Japan banned poultry from China. CP factories in Thailand filled the market gap by increasing exports to Japan. A supply chain arrayed across multiple countries can compensate for the interruptions in business, even as it also, ironically enough, increases the risk of influenza spread.

In contrast, many small farmers suffer catastrophically from this virus dumping, even when they’re under contract to agricultural companies. Smallholders typically can’t afford the biosecurity changes needed to protect themselves from such outbreaks in the first place or the wholesale repopulation of their livestock in the aftermath (even when subsidized in part by their government). Living market day-to-market day, they can’t afford the losses incurred upon their already thin margins when their operations are disrupted by the government-imposed quarantines and culling campaigns that follow.

That’s nasty. But the insult to injury is in agribusiness’ faux-righteous follow-up. And here we see the kind of conscious manipulation at the heart of grain dumping. In an act of evil genius, multinationals support national efforts to institute new biosecurity standards only the largest companies can afford.

Mike Davis offers an example. When H5N1 outbreaks began in Thailand in 2004, corporate chicken-processing plants accelerated production. According to trade unionists, processing increased at one factory from 90,000 to 130,000 poultry daily, even as it was obvious many of the chickens were sick. Once the Thai press reported on the illness, Thailand’s Deputy Minister of Agriculture made vague allusions to an “avian cholera” and then-Prime Minister Thaksin Shinawatra publicly ate chicken in a show of confidence.

It later emerged that the CP Group and other large producers were colluding with government officials to pay off contract farmers to keep quiet about their infected flocks. In turn, livestock officials secretly provided corporate farmers vaccines. Independent farmers, on the other hand, were kept in the dark about the epidemic, and they and their flocks suffered for it.

Once the cover-up was exposed, the Thai government, with industry support, called for a modernization of the industry, including requiring all open-air flocks exposed to migratory birds be culled in favor of production in new biosecure buildings for which only the best-capitalized farmers could pay. Reward those who cause the problem. Punish those who suffer most.

Another example. In an effort to better track animal outbreaks, the USDA has proposed requiring all U.S. livestock be tagged with radio chips. A source of a new disease could then be tracked within a matter of days. A good idea, it seems, given the U.S. now knows nothing of the whereabouts and movements of its livestock. Except, as Shannon Hayes writes,

the National Animal Identification System…would end up rewarding the factory farms whose practices encourage disease while crippling small farms and the local food movement…

For factory farms, the costs of following the procedures for the system would be negligible. These operations already use computer technology, and under the system, swine and poultry that move through a production chain at the same time could be given a single number. On small, traditional farms like my family’s, each animal would require its own number. That means the cost of tracking 1,000 animals moving together through a factory system would be roughly equal to the expense that a small farmer would incur for tracking one animal.

The diseases that wipe out Big Food’s smaller competitors also offer an opportunity to cripple them between outbreaks.