What to read to understand causes and action needed in the current food crise

Many newspaper articles, papers, etc. are disseminated in these days to inform the issue of rising food prices and their causes, impacts on developing countries. However, I found only an article that is comprehensive and that explain well the issue, impacts and the way out. If you are interested on this issue you should read this article of Bridges (ICTSD).

agriculture trade and development food prices

Greenhouse Gas Emissions of Air Transportation: A Wrong Reason to Reduce Developing Countries Exports of Counter-Season Vegetables and Fruits

In many developed countries, particularly in Europe, there is growing concerns on our consumption habits impact on Green House Gas (GHG) emissions and climate change. Many environmental NGO are underlining that importing vegetables and fruits via air transportation is damageable for the environment because of "useless" GHG emissions. This position is becoming largely shared by citizens. Some organizations propose simply to eliminate these imports.

The problem is that these kinds of products are very important for many developing countries. In facts, vegetables and fruits are very dynamic and allow developing countries to specialize on rising prices products.

What is more, these NGOs forget that air transportation account for only 3% of GHG emissions. Probably, they must spend their efforts in other sectors. For example, it will be more useful in Europe to increase public transportation, to increase taxes and costs linked to cars, to decrease useless intra-EU trade (for example, statistics tell us that half of trucks around Europe are empty), increase incentives for ecological houses, etc.

Furthermore, the problem of GHG emissions can be easily solved by adding to the price some cents for sustainable development projects in developing countries that reduce GHG emissions. There is not a need to ban or reduce counter-season imports from developing countries.


trade development agriculture GHG climate change

China continue to growth very fast: US subprime crise does not matter

These day we discovered that China continue to growth at more than 10% rate. The US subprime crise and the developed countries slowdown seems to have any impact.

This is very important. In fact, it is a good indicator that emerging markets succeed to decrease their dependency on developed countries growth and economic situation.

The world is changing. Henceforth, the engine of world growth are any more developed countries but emerging countries. The economic power has shifted. Nothing seeems to slow down emerging countries (especially China, India and ASEAN countries).

Unfortunately, many developed countries policy makers did not seem to have understand this change. In fact, they continue to use global governance institutions like if they were in the 80s when their supremacy was incontestable.

emerging countries global governance growth

The Missing Element To Understand High Food Prices: Past Developed Countries Policies Matter

These days there is a lot of media coverage on high rising food prices and their impacts on developing countries. Media, scholars, NGOs and International Organization underline 3 causes that explain the rising of food prices:

• Emerging Markets growing demand of food (notably milk and meat).
• Growing Biofuels production.
• Market speculation.
  

All these elements played a crucial role in increasing food prices. Nevertheless, there is another explanation that it is never mentioned: the long-term impact of developed countries subsidies and protectionism.

In fact, developed countries dumping reduced and reduce the incentive for developing countries farmers to produce more food. What is more, dumping on international and local markets in the last couple of decades pushed out of business an important number of developing countries. The consequence was a reduction of the (growth of) developing countries food production. In fact, for example, the number of ha used for cereals production in developing countries decreased of more than 13% (FAO stats) since 1975.

Developed countries are in large part responsible of the current situation (also because of the negative impact on developing countries agriculture of the liberalization promoted by developed countries in the 80s and the 90s). They should pay for their responsibilities.

food prices agriculture trade and development

Rise of food prices: the two sides of the coin

IHT Blog, "Managing Globalization", synthesizes two interesting articles that shows the two aspects of food price rise: danger for consumers and gains for producers in developing countries.

Particularly interesting is the second article that give some insight on how developing exporter countries should manage and use these additional resources in order to create a long run sustainable growth.

Increasing food prices: what solutions to increase gains for rural poor and decrease risks for urban poor and developing countries?

Dani Rodrik comment in a very insightful post a statement made by Mr Zoellick that show how many decision-makers does not understand neither what is going on in agricultural markets nor what will be the impacts on development and poverty of high prices. In fact, they merge the old discourse (high agricultural prices = gains for developing countries) with a new one (high prices = problems for urban poor). Either discourse it is true but we need an analysis that take into account both and that provide some solutions.

To start, we should remember three elements:

• High food prices are caused by biofuels and emerging countries growing demand but also by speculation on commodities markets.

• 2/3 of the poor lives in rural areas and depends on agriculture and many of the urban poor are former peasants.

• Many developing countries, even if they are net importing countries, have still an important potential in expanding their agricultural production.
  

These elements mean that high agricultural prices are positive for most poor in developing countries but the risks are very high because urban poor uprising (caused by high food prices) can destabilize several developing countries.

This mean that we need to find solutions to reduce these risks and the adjustment costs. Developing countries need neither more food aid (which often create many problems) nor laissez-faire.

Developing countries need active rural development policies (founded also through Aid), which will increase their agricultural production (also by helping urban poor to come back to rural areas that they leaved) and some policies to decrease food prices in urban areas (notably by creating food stocks filled by national production). These policies need important resources that should be provided by bilateral and multilateral donors. The problem is that, even after the last World Development Report, I do not see an upward trend in Aid dealing with rural development and food policies in developing countries.

agriculture sustainable development WTO food prices

A proposal for a co-development contribution index: for an effective assessment on developed and emerging countries role in sustainable development

The Center for Global Development developed an interesting index to measure the developed countries commitment to development. It is based not only on aid but also on trade, investment, migration, environment, security and technology transfer contributions: it is truly comprehensive. This tool is very useful and innovative. It contributes to raising the pressure on developed countries and to advocate for an increasing contribution to development.

Nevertheless, I have some key elements that a development contribution ranking should imperatively include:

1. Considering their increasing role in the international economy and politics, such a ranking could take into consideration also the impact of emerging markets (including in their own development).
2. In order to improve the ranking, building index for every dimension is not very transparent and effective. I think it will be better to transform all contributions in monetary terms. The index will be based on monetary contribution on development calculated in percent of GDP.
3. Both positive and negative contributions will be taken into account.
   

This index will be very useful to understand the real impact of every developed and emerging country on development. It will pose number of methodological problems but it will be more effective for advocacy and more transparent.

To calculate this raking I propose the following elements (it is only a raw thought that need to be further developed) to be taken into account in the calculations:

• Aid Contribution = Aid flows – food aid negative impacts – debt interests – aid that does not contribute to development.
• Trade contribution = Trade opportunities used (notably for manufactured goods and advanced services) – losses due to protectionism – losses due to subsidies (both on world and developing countries markets) – negative externalities of liberalization measures promoted by developed countries (also through WTO, World Bank, IMF and other institutions).
• Investment contribution = Investment flows – negative impacts of Transnational Companies – developing countries money in foreign banks
• Migration contribution = remittances – losses due to emigration of skilled workers – losses due to death of emigrants (caused by developed countries restrictions) + gains of temporary workers + gains in term of skilled workers that return in their developing country.
• Environment contribution = aid for environmental goals (e.g. GEF) – cost of environmental degradations caused by rich countries and their transnational companies (e.g. pollution of companies and climate change) – cost of policies to protect the environment imposed by developed countries.
• Security contribution = aid to conflict resolution and prevention (included cost of military intervenction that contributed to avoid or stop a civil war) – exports of arms to developing countries – cost of wars against developing countries (included embargos).
• Technology transfer contribution = value of technology transferred – copyrights and licenses cost – cost of property right imposed to developing countries (including cost of implementaing IPR policies)– cost caused by developed countries policies that limit access to technology.
  

By adding up these elements, we can find the value of a country contribution to development. I guess that many countries will have a negative score. This index will be difficult to calculate but it will be very useful to better understand both why asymmetries exist and how we can reduce them.

Sustainable Development Index ODA trade and development

Explaining the rush to regionalism to mainstream economists

Mainstream economists simply do not understand why so many developing countries participated to regional integration processes.

In fact, according to neo-classic economists, Regional and Free Trade Agreements are only a second best solution compared with global free trade. Moreover, often they create trade diversion and they decrease overall welfare.

To understand the reasons and potential opportunities that regional integration we should remember two important elements:

• Economic development works not as mainstream economists tell us. I explain more broadly the real connection between trade and development in another post.

• Regionalism it is mainly about politics and regulating more effectively the global economy.
  

Regarding the political dimension, there are two quotations that help us to understand why developing countries pursue a regional agenda:

The myriad of forces that are present in “globalization” generate uneven impacts and opportunities both within and between states. One reaction to such unevenness is to advance regionalism to both contain and exploit globalization. Boas, Marchand and Shaw (2005, p. 168)

In a globalized economy, where countries individually have reduces options for national economic policy-making and where the multilateral institutions framework is insufficient or lacks a strong development dimension, the creation of regional institutions may very well be a pragmatic response, and its success would extend the principle of “adaptative efficiency” (1) to cross-border relations. UNCTAD (2007, p. 40)

In conclusion, mainstream economists should remember that in order to understand the reality we should adopt and interdisciplinary model based more on empirical evidence than on mathematical models. The consequence is that mainstream economists fail to aknowledge the large number of potential positive impacts of regionalism for sustainable development.

Footnotes

(1) According to UNCTAD “adaptative efficiency” is the strategy that was adopted by successful economies that means: “the capacity to develop institutions that offer a stable framework for economic activity, but at the same time are flexible enough to provide the maximum leeway for policy choices, at any given time and in any given situation, in response to specific challenges” (idem)

References

Boas M., Marchand M.H. and Shaw T.M., The Political Economy of Regions and Regionalism, New York, Palgrave Macmillan, 2005

UNCTAD, Trade and Development Report, Regional Cooperation for Development, Geneva, 2007

regionalism trade and developmant globalization