Food Security and Climate Change

The relationship between food security and climate change is very complex. In fact, it could also have some positive impacts. I red a paper that summarize very well the issue. In fact, this is the paper that, as far as I know, better explain the link between food security and climate change:

Schmidhuber Josef and Tubiello Francesco N. , Global food security under climate change,
December 11, 2007, PNAS, vol. 104, no. 50, pp. 19703–19708.

Still Waiting for Developed Countries Commitments and Action on Food Crisis

In the lasts months, International Organizations as well as NGOs multiplyed ewquests for additional foundings both in the short and in the long term in order to fight against food crisis negative impacts on the South.

World Bank was probably the most active institution. They propose an interesting action plan that couple both emergency intervenctions (mainly through financing food vauchers that are less distoritves than in-kind food aid) as erll as medium term investments and aid to improve productivity in the South. Mr. Zoellick call it a New Deal for the food crisis.

So far, so good. This time solutions proposed seems to be pragmatic and not biased toward a so-called neo-liberal ideology (as in the 80s and 90s). What is more, the debate with other organizations provide some other needed policy changes as, for example, more "policy space" for developing countries, the need to increase climate adaptation aid, etc.

The problem it that as Mr Diouf (FAO Secretary General) says these kind of programs have been created by the FAO (among others) many years ago. The problem is that founding by developed countries was not enough to implement them.

Once again, in this current cisis, developed countries do not answer quickly by providing new founding. They simply put on the table some small grants in order to demonstrate to theyr citizens that they are doing something.

We need to change the system by reducing the dependency of the UN and other international institutions on developed countries "special contribution" (in fact, "compulsory" contribution are quite low and allow only to run these institutions). The ideas to found a global development program with a small tax on airplanes tickets or on financial transactions need to be further explored and implemented.

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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.


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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.

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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.

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WTO Agricultural Negotiation Update

Yesterday, the WTO released the following news on the advances of agricultural negotiations of the Doha “Development” Round:

Intensive consultations among a group of importing and exporting countries will be allowed to continue for a few more days in an effort to achieve a breakthrough that would also allow progress in the agriculture talks as a whole. By 31 March or earlier New Zealand Ambassador Crawford Falconer, who chairs the talks, will reconvene multilateral talks so that representatives of the full membership can negotiate the outcome and continue with other major issues, leading to a revised draft blueprint of the final deal. That is what he concluded after hearing members’ comments on 14 March 2008.

For more information and to listen Mr Falconer declarations go to this WTO page.

We will see if this process will create a breakthrough in the negotiations. Personally, I am not very confident that this will happen at least for two reasons:

1. There are still a large amount of issues where Members have very far positions.
2. An important number of Members (e.g. the US) have not enough political will to agree on the necessary concessions.

Furthermore, in the last seven years I heard many times that a breaktrough was feasible and that they will respect a dedline that they agree. Almost every of these deadlines were posponed. They lose their credibility. Nevertheless, a miracle or a surprising outcome it is always possible as the Uruguy Round showed us.

WTO global governance agriculture

What role plays agriculture in economic development?

In 2007-2008 agriculture became once again a major issue in the global agenda. Even, the World Bank recognizes the importance of this sector for economic development in its 2008 World Development Report. Another reason is linked to rising prices of agricultural commodities caused by drought in some major exporting countries (e.g. Australia), rising global consumption and growing use of agricultural commodities for biofuels. Some actors underlined that the 21th century will be the agricultural century.

Agriculture plays for sure an important role in development. In fact, according to IFAD, 2/3 of poor in developing countries live in rural areas.

Agriculture debates at the international level are always linked with the trade dimension. In fact, even if only around 10% of the global production is traded, trade plays a crucial role in agriculture because it influences greatly prices. Trade in crucial for farmers incomes as well as for the added-value produced by the agricultural sector. For this reason, agricultural negotiations at the WTO are very difficult.

Economic history, as Reinert and other authors show us, can give us some insight on the role of agriculture in development:

• Never in the history a country succeed to achieve development through its agricultural sector. In fact, often agricultural products are subject to decreasing returns that, as we showed in a post on trade and development linkages, does not enable a country to develop successfully. Nevertheless, some products can be subject to increasing returns notably rare products (Japanese beef meat from cow daily massed with sake), transformed and typical products (e.g. Swiss cheese, wine, etc.) and likely biofuels.

• Never in the history was rural development possible without the presence in the same region/country of an industrial sector providing inputs and tehcnological innovations. Historically only industrialization allowed to raise durably productivity in agriculture.

Nevertheless, agriculture can play an important role in development event if we take into account what the history tell us:

• Agricultural exports enable countries to increase their incomes that can be used to implement a strategy of industrialization and of development of an advanced service sector. An interesting option to start industrialization is to create an industry that transforms agricultural commodities. Often, this industry is easier to set up than high-tech industry. This will increase the country income, by climbing the value chain. These additional resources will be invested again in order to improve industrialization and create new industries, jobs and incomes. In this way, a developing country can start a virtuous economic development cycle.

• Agriculture can raising incomes and help poor farmers to increase their consumption and improve their education. These two outcomes will both increase the national/regional market size essential to allow the development of a national (temporary protected against international competition with tariffs) industrial sector and increase the opportunities of farmers (when productivity rise) to have the skills required to work in the industrial sector. This process is what we observed in developed countries history.
  

You will think: “If it is so easy, why only a bunch of developing countries succeed to achieve high growth rate?” The reason is quite simple. Developing countries faced huge difficulties to export their agricultural commodities at a fair price. Historically there were at least three reasons:

• Developed countries subsidies depressed international as well as developing countries local prices. This both decreased farmers and developing countries incomes and pushes out of business many farmers. For this reason, nowadays number of developing countries, even net importers of agricultural products, cannot fully profit of their production potential. Developed countries subsidies are a partial explanation of the growth success of many developing countries between the end of WW II and the 70s (when subsidies were relatively low in developed countries) and the growth low rates in the 80s and 90s (when developed countries invest large amount of money in subsidies).

• Developed countries, for long time basically the only market for developing countries, in order to protect their farmers, adopted high tariffs and implemented non-tariff measures that restrict greatly the acess to their markets. Subsidies also played a role. In fact, they caused overproduction and reduced the need of import. What is more, developed countries tariffs policies imposed higher tariffs on transformed products (tariff escalation) in order to protect their agro-industry. This constraint developing countries to continue to export commodities without having a chance to develop their transformation industry.

• World Bank and IMF structural adjustment policies constrained many developing countries to specialize in the production of agricultural commodities. These policies create overproduction that led to low prices.

• Agro-industry is an oligopoly of developed countries industries that take advantage of their dominant position by negotiating low prices with producers. This issue can be solved if the WTO rules will include an international antitrust policy. This was never very high on the agenda because developed countries want to continue to take advantage of their dominant position in many sectors.

Today, the situation is different. In fact, agricultural prices were very high the last couple of years. The consequences are that developing countries can use agriculture more profitably to start a sustainable development path. What is needed is a WTO agreement that:

1. Pushes developed countries to decrease their subsidies and opens their market (and eliminate tariff escalation);

1. Allows developing countries to implement policies (tariff and subsidies) to modernize their agriculture (and temporarily protect poor farmers until an industrial sector is developed) and to increase their competitiveness and export capabilities.

In conclusion, agriculture can be a powerful tool to start a sustainable growth and economic development. Nevertheless, barriers that prevent to realize this potential are still large. Doha Round negotiations do not seem to be likely to remove these barriers effectively.


References

IFAD (2001), Rural Poverty Report. The Challenge of Ending Rural Poverty

Reinert Erik S. (2007), How Rich Countries Got Rich... and Why Poor Countries Stay Poor, New York, Carrol And Graf

World Bank (2008), World Development Report. Agriculture for development

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