The Dual Impact of Globalisation on Plantation Industries

Globalisation has fundamentally reshaped how plantation industries operate, trade, and compete on the world stage. Under the framework of the World Trade Organization (WTO), countries growing commodities like tea, rubber, coffee, and spices have had to navigate a new set of rules – rules that opened global markets but also exposed local industries to competition they were not always prepared for. The impact has been neither entirely good nor entirely bad. It is a story of two sides: new opportunities on one hand, and significant economic and social challenges on the other.

The WTO and the Agreement on Agriculture 🔗

To understand how globalisation affected plantations, you first need to understand the instrument that drove much of the change: the WTO Agreement on Agriculture (AoA). This agreement came into force on 1 January 1995 as part of the Uruguay Round reform programme. Its core objective was to establish a fair and market-oriented agricultural trading system by disciplining three key areas: domestic support (government subsidies to farmers), export subsidies, and market access (import tariffs and quotas).

Before the WTO, agricultural trade was highly distorted. Governments freely used export subsidies and price support mechanisms that pushed commodity prices below actual market levels. According to the WTO, this resulted in over-production and “dumping” – flooding world markets with cheap agricultural goods that undercut producers in poorer countries. The AoA was designed to correct these distortions, and for plantation-producing nations, the consequences of this correction have been far-reaching.

The positive side: fairer trade rules and market opportunities 🔗

Shifting from price support to direct income payments 🔗

One of the most significant positive reforms under the AoA was the pressure on governments to move away from trade-distorting price support mechanisms toward direct income payments that cause minimal market interference. The WTO classifies domestic subsidies into three “boxes” – amber (most trade-distorting, subject to reduction), blue (production-limiting but still distorting), and green (minimally distorting, permitted without limits). Amber box measures – such as direct price support linked to production levels – had to be progressively cut. Developed countries were required to reduce such support by 20% over six years from 1995, and developing countries by 13% over ten years.

For the plantation sector, this shift matters because price support-based policies in major importing countries had for decades kept artificially high domestic prices, disadvantaging foreign plantation producers. As those supports were reined in, demand signals from global markets became more transparent and plantation exporters could compete more fairly. Countries producing tea, rubber, and spices gained the prospect of entering markets on a more level playing field than before.

Capping and eventually abolishing export subsidies 🔗

Perhaps the most direct benefit globalisation delivered to plantation industries was the discipline placed on export subsidies. The WTO’s reform programme on export subsidies committed members to reduce both the quantities of subsidised exports and the financial outlay spent subsidizing them. This process culminated in a landmark outcome: at the 2015 Nairobi WTO Ministerial Conference, member nations agreed to abolish agricultural export subsidies entirely, along with new disciplines on export credits and food aid.

Prior to this, rich countries had used export subsidies to dump plantation-competing products like low-cost tea blends and processed rubber goods onto world markets at below-cost prices. The elimination of these subsidies removed a structural disadvantage that had plagued plantation producers in Asia and Africa for decades. Countries like India and Sri Lanka, which export significant volumes of tea, and Indonesia and Thailand, which are among the world’s top natural rubber producers, stood to benefit from a more competitive and transparent global market.

Improved market access and the protection of unique products 🔗

Globalisation also opened up new export markets for plantation commodities. Indonesia, for example, saw its agricultural plantation sub-sector exports – particularly rubber – surge from 2.55% to 3.65% of total agricultural exports between 2016 and 2017, with natural rubber demand in world markets reaching USD 5.1 billion. Reduced trade barriers under WTO agreements gave plantation-producing nations greater reach into global markets they had previously struggled to access.

Additionally, under the WTO’s TRIPS (Trade-Related Aspects of Intellectual Property Rights) agreement, unique plantation products can be protected through geographical indications. This has enabled countries to defend the premium identity of products like Darjeeling tea and Ceylon cinnamon in global markets – a form of protection that also supports the economic viability of specific plantation regions.

The negative side: competition, price volatility, and social strain 🔗

Import duty reductions exposed local industries to intense competition 🔗

While globalisation offered export opportunities, it simultaneously lowered the protective walls that shielded local plantation sectors from foreign competition. Research examining tariff rates under the ASEAN-India Free Trade Agreement found significant reductions for several tropical commodities in relation to WTO bound rates. This fall in tariff rates directly reduced the ability of a country to check price falls and price volatility.

For plantation crops like natural rubber, this has had concrete effects. As cheaper rubber imports – often from countries with lower production costs – entered domestic markets under reduced duty regimes, local producers found themselves competing at price points they could not sustain. Studies on the impact of WTO membership on agricultural producer prices in Asian countries found that, while GATT implementation raised producer prices, WTO implementation had the reverse effect – pushing producer prices downward across key agricultural commodities including plantation crops.

Economic downturns in plantation regions 🔗

The pressure of open markets has translated into financial crises for plantation industries in several countries. In Sri Lanka, for instance, estates producing tea and rubber have faced severe economic strain as global price competition intensified. Sri Lanka has the highest tea production costs in the world – labour costs alone account for approximately 67%-70% of total production costs – while competing against countries with significantly lower per-unit costs. When auction prices dropped, plantation companies incurred heavy losses, and the entire sector’s survival came under question.

Rubber has faced comparable pressures. Reduced demand from major buyers such as China, combined with falling prices of synthetic rubber – a substitute product – drove natural rubber prices to levels where companies were incurring losses on every kilogram produced. These are not isolated events; they reflect a structural vulnerability that the opening of markets under globalisation has accentuated.

Job losses and declining employment in plantation communities 🔗

The economic downturn in plantation regions has had a direct and human cost: job losses. In Sri Lanka, plantation employment declined by more than a third of the workforce between 2000 and 2016. In India, employment in tea plantations also saw a marked decline due to price drops that worsened estates’ financial situations, with several plantation companies in West Bengal closing down at the turn of the millennium, leading to an estimated 1,200-1,800 deaths from loss of income and food security.

The informalisation of plantation labour has made the situation worse. The regular workforce in Sri Lanka’s tea sector declined by approximately 72% between 1981 and 2018, as estates increasingly replaced permanent workers with seasonal or irregular labour to avoid the cost of providing social security and welfare benefits. Workers at the bottom of the value chain – particularly women, who make up the majority of the tea-plucking workforce – have borne the steepest costs of this restructuring.

Weakened bargaining power of smallholders 🔗

A particularly damaging feature of globalisation for plantation sectors has been the erosion of smallholder bargaining power. In a period of fragmentation of land holdings and atomisation of farming, state intervention has tended to encourage competition among producers at the upstream end while limiting competition at the downstream end – meaning that while growers compete fiercely against each other, the traders, exporters, and processors who purchase their output face little competitive pressure. This imbalance has consistently worked against smallholder plantation farmers.

Research across South Asian tea-producing countries found that while sales and exports of plantation commodities fetch considerably high prices, little is being paid to workers and smallholder farmers – the wages received are inadequate to sustain even basic needs, and remain lower than minimum wages in other sectors within the same economies.

Labour standards: an emerging concern on the global stage 🔗

The negative social impacts of trade liberalisation have not gone unnoticed at the international level. Institutions including the International Labour Organization (ILO) and the UNDP have drawn attention to the need for new strategies to address labour standards related issues proposed under WTO negotiations. This has led to new trade standards incorporating ‘social clauses’ – provisions that link trade access to minimum labour rights and worker protections. Fair trade certification schemes have also emerged as market-based responses, offering premium prices to plantation producers that meet defined standards for worker welfare.

While these mechanisms are far from a complete solution, they signal a growing acknowledgement that trade liberalisation cannot be evaluated on economic metrics alone. The communities that depend on plantations for their livelihoods – many of them among the most historically marginalised populations in South and Southeast Asia – need protections that pure market logic does not automatically provide.

Navigating the balance 🔗

The dual impact of globalisation on plantation industries is not a paradox – it is the predictable result of integrating economies with vastly different cost structures, histories, and levels of domestic support into a single trading system. The WTO Agriculture Agreement’s objective of fairer, more market-oriented trade is a legitimate goal. But fairer global rules alone do not automatically produce fair outcomes for the farmers, tappers, and tea-pluckers who anchor the plantation economy at its base.

Countries that have managed this transition most effectively are those that have combined compliance with global trade rules with active domestic policy – investing in productivity improvements, infrastructure, value addition, and social protection for plantation workers. The challenge going forward is to ensure that the gains from open markets are broad-based, and that the costs of competition are not borne disproportionately by those least able to absorb them.

What do you think? Should WTO trade agreements include binding minimum labour standards to protect plantation workers in developing countries, or is that better handled through domestic policy? And given that globalisation has both opened markets and increased price volatility for plantation crops, how should governments balance the push for export competitiveness with the need to protect the livelihoods of smallholder farmers?

References

1. https://www.wto.org/english/tratop_e/agric_e/agric_e.htm
2. https://www.wto.org/english/tratop_e/agric_e/ag_intro01_intro_e.htm
3. https://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm3_e.htm
4. https://www.wto.org/english/tratop_e/agric_e/agboxes_e.htm
5. https://www.wto.org/english/tratop_e/agric_e/ag_intro04_export_e.htm
6. https://pmc.ncbi.nlm.nih.gov/articles/PMC10653504/
7. https://ideas.repec.org/a/fas/journl/v5y2015i1p39-60.html
8. https://www.sciencedirect.com/science/article/pii/S2405844024006662
9. https://bizenglish.adaderana.lk/sri-lankas-plantations-in-crisis-estates-suffer-massive-losses-in-2014-says-association/
10. https://www.fairtrade.net/content/dam/fairtrade/max-havelaar-france/publications/etudes-impact/Fairtrade-study-tea-hired-labour-in-India-and-Sri-Lanka.pdf
11. https://www.cadtm.org/South-Asia-Report-Plight-of-tea-plantation-workers-and-smallholder-famers
12. https://saape.org/wp-content/uploads/2023/12/South-Asia-Tea-Report_Plights-of-Tea-Plantation-Workers-Smallholder-Farmers-2022_2.pdf
13. https://www.researchgate.net/publication/357157839_Do_trade_certifications_alleviate_economic_and_social_deprivations_of_plantation_workers_A_study_of_the_tea_plantation_sector_in_India