Four current multibillion-dollar deals in the agriculture sector are ringing alarm bells around the world - the takeovers of Syngenta by ChemChina and of Monsanto by Bayer; and mergers between Dow Chemicals and DuPont, and between Potash and Agrium. Consequently, the global agricultural input market will get further concentrated, which in turn would impact the global food value chain (GFVC). After 'defence', it is 'food' that is the most important consideration for a nation's security. Thus the fact that control over GFVC is getting consolidated in fewer and fewer private hands, could pose serious security concerns. It is suggested that BRICS (Brazil-Russia-India-China-South Africa) countries should tackle this jointly through a coordinated competition policy.
Unlike many countries, for India, it may not be an immediate concern, but having allowed FDI (foreign direct investment) in food sector, it needs to closely track such global developments. In turn, it should become a partner to any global strategy to deal with increasing consolidation in GFVC and associated concerns such as abuse of dominance. It can be said with certainty that a key element of any such strategy would be competition policy.
It must be noted that core of competition law enforcement is 'economic analysis', which in turn is guided by the 'economic doctrine' followed by the enforcing country. While some will emphasise 'efficiency' during economic analysis, others may like to include the 'public welfare' angle. There may also be different treatment to different sectors. For instance, the poor farmers' margin is getting increasingly squeezed between input providers and commodity buyers. Such uneven bargaining power in GFVC might not come into the ambit of competition lens from 'efficiency' and 'optimal resource allocation' angles. On the contrary, such analysis might favour consolidation amongst 'input providers' and 'commodity buyers'.
Viewing huge corporate power, backed by the powerful rich countries, it would not be easy for individual, particularly developing, countries to deal with cross-border competition concerns. If approached individually, it is more likely that their economic analyses would get influenced by the 'economic doctrine' practised by powerful rich countries. Therefore, affected countries, especially developing-country blocs like BRICS, should come together to steer and shape a multilateral strategy to deal with present and future global competition concerns.
Fortunately, there have been some positive developments on the BRICS front. Competition authorities from BRICS countries have signed a cooperation agreement and patent authorities are having separate meetings. In addition, there is a BRICS Food Working Group to develop suitable strategies. And above all, the theme - Building Responsive, Inclusive and Collective Solutions - of the 8th BRICS Summit, to be held in India in October 2016, is very apt in the given situation. All this adds to the suitability of the forum in the present 'time and space' to take a lead in developing an agenda for a Multilateral Competition Policy. A suitable approach for the BRICS nations could be to first have a Plurilateral Competition Policy amongst them and then open it for other like-minded countries to join the arrangement.
Albeit, as China's own state enterprise, ChemChina, is acquiring Syngenta, it would like a facilitative approach and may like to "exploit the global market" in future. Though, China has said that it is acquiring Syngenta to improve domestic agriculture productivity. It may be interesting to note here that while US has given green signal to ChemChina-Syngenta deal, China seems to have done the same for Bayer-Monsanto.
The agenda on Trade & Competition Policy was introduced at the World Trade Organisation (WTO) in 1996 as "new issues" along with investment, transparency in government procurement. To begin with, it was a study approach, but later it became a negotiating agenda. This was opposed by the developing world and finally all of them, other than trade facilitation, were withdrawn from the WTO Doha Development Agenda in 2004. Since then there has been a sea change in global economic architecture, following the two WTO ministerials at Bali in 2013 and Nairobi in 2015. In all probability, competition policy and investment policy maybe on the future negotiating agenda at the WTO as plurilateral agreements. With substantial experience of trade and globalisation in the developing world, the developing countries should participate proactively in such negotiations so that they can influence the contents and ensure that they are balanced.
In any multilateral negotiation, contentious issues arise mainly because of two factors: (1) aggressive agenda of market access; and (2) defensive agenda, which include protection of policy space to address national concerns. For example, inclusion of intellectual property rights into the WTO acquis [accumulated legislation] was the most contentious issue during the Uruguay Round. This finally got settled when trade and IP (intellectual property) rules allowed policy space for nation states to address their concerns, particularly with respect to agriculture (seed) and health (pharmaceuticals).
Today finding a common ground on the regulation of market distortions in the highly sensitive sectors of food and agriculture through better and cooperative competition regimes, and more so in the multilateral trading system, is an imperative, which we can ignore at our own peril. BRICS can offer a middle path and introduce it at the WTO.
The author is Secretary General, CUTS International. Ujjwal Kumar of CUTS contributed.