Not much respite in prospect on food export restrictions, if today’s FT is anything to go by. Vietnam, the world’s second largest exporter of rice, has imposed a minimum price of $800 a tonne on rice exports (the price last year was $300 – ouch). Meanwhile, Argentina has just passed a tariff bill which “is not likely to lead to an immediate resumption of grain exports in the world’s third-biggest soy producer, sixth-biggest wheat producer and second-biggest corn exporter, analysts say”.
These problems underline a bigger challenge lurking in the background: that while the world may have a rules-based global trading system built around the WTO, that system is built for totally different trading conditions to the ones that obtain today.
In essence, the WTO and its dispute resolution architecture are designed to help countries to work through squabbles about market access and dumping – the sort of scuffles you expect in a buyer’s market. Fine – except that today, we’re in a seller’s market, on food and energy alike, where the concerns that are really furrowing brows are over security of supply, not market access.
And as a range of current examples show, the one thing policymakers can’t do is just sit back and ‘leave it to the market’. On energy, there’s already increasing friction over strategic oil supplies in Africa, the Arabian Gulf and the South China Sea. On food, meanwhile, export restrictions have left many countries in serious difficulties – like the Philippines, which is trying to go self-sufficient in rice within three years (from being the world’s no. 1 importer today – good luck). Meanwhile, China, Saudi Arabia and other importers are engaged in a quiet but determined hunt for land to buy in third countries.
Over the long term, these pressures may increase dramatically. Demand for energy and food is forecast to grow by 50 per cent each by 2030, according to the IEA and the World Bank respectively. If supply growth fails to keep pace – as seems entirely possible, especially given that food and energy prices are increasingly interlinked (through fuel costs, fertiliser costs, and the arbitrage relationship created by biofuels) – then situations like these will in retrospect seem like no more than trailers for the main feature.
In that context, it would be helpful if our rules-based trading system had something – anything – to say on the subject of security of supply. Do major exporters of key strategic resources have responsibilities as well as rights in the international system? Or is it no more than the legitimate exercise of sovereignty if they suspend or restrict exports at a moment’s notice?
Big questions – but not ones that are the subject of searching debate among trade negotiators. Like Britain’s artillery guns in Singapore during World War Two, the world trade system’s defences are pointing the wrong way.
