Trade is vital for food security
The world still lacks coherent international and domestic agricultural policies to deal with food security and the double-edged sword of higher prices, said Pascal Lamy. "It comes in the wake of repeated "food price crises," with the World Bank Food Price index showing a 33 percent rise in July from a year-ago, and staying close to 2008 peak levels. Price rises have been particularly high for maize, corn, and sugar", he explained, in an address to the XIIIth Congress of the European Association of Agricultural Economists in Zurich.
"Stocks at the international level are also at record low levels. While the rise in food prices can be beneficial to farmers, it endangers the food security of many vulnerable consumers. In fact, the rise in food prices has been an important factor in the social unrest that we have witnessed in some quarters of the globe recently," said Lamy, the Director-General of the World Trade Organization (WTO).
According to his explanation "there are many factors that have been cited as the cause of these repeated crises, some long-term structural factors, and others short-term, such as: biofuels, rising oil prices, changing Asian diets, declining grain stocks, financial speculation, and climate change and its associated risk".
In his opinion, "the world still has a long way to go in designing a coherent international agricultural trade policy framework.
This has been visible in the Doha Round of trade talks. International trade, if properly instrumentalized, though should help us exit these repeated crises". And, to his mind, "the Doha Round remains an opportunity for vital agricultural reform". He considered that "Land management, water and natural resource management, property rights, storage, energy, transportation and distribution networks, credit systems, and science and technology, are all key elements of a successful agricultural policy and food security system". He believes that the international community continues to be a disagreement on what "global integration" can do for agriculture (in particular, international trade). According to Lamy, "global integration allows us to think of efficiency beyond national boundaries. It allows us to score efficiency gains on a global scale by shifting agricultural production to where it can best take place. It can also allow for a more efficient sourcing of the inputs to agricultural production".
Moreover, whereas trade-distorting subsidies for industrial goods are legally-actionable in the WTO, many trade-distorting agricultural subsidies have found shelter in Amber and Blue Boxes, and a Peace Clause. Whereas the world's trade-weighted average industrial goods tariff is about 8 per cent, in agriculture it is 25 per cent. Not to mention tariff peaks, which in agriculture still rise up to 1000 per cent. This lack of a shared vision took on a different dimension during the multiple food crises of the past few years.
In response to the crises, some started looking further inwards, and we saw a whole host of export restrictions flourish. These export restrictions had a domino, market-closing, effect, with one restriction bringing about another, as the world started to anticipate a global food shortage.
Lamy assured that the International trade was not the source of the food crises. If anything, international trade has reduced the price of food over the years through greater competition, and enhanced consumer purchasing power. International trade has also brought about undisputable efficiency gains in agricultural production. He called for understanding that the "size" of agricultural trade to put matters in context. International trade in agriculture is less than 10 percent of world trade.
Furthermore, whereas 50 percent of the world's production of industrial goods enters international trade, it is important that you know that only 25 percent of the world's agricultural production is traded globally. In the case of rice, this figure drops to 5-7 per cent, making for a particularly thin international rice market. In addition, of the world's 25 percent of food production that enters international trade, the vast majority (two-thirds) is processed food, and not rice, wheat, or soya as some would like to claim. The international trade, and indeed improvements to international trade rules through the Doha Round, would be only one component of better agricultural policy globally. Agricultural policy starts at home, and not at the international level. However, the reform of global trade rules and a better functioning international transmission belt for food are vital components of an enhanced food security picture, said Lamy.