by Alex Evans | Jun 2, 2008 | Africa, Climate and resource scarcity, Economics and development
I had a long chat with Pascal Fletcher at Reuters on Friday while he was writing this article on the effect of price rises for food and fuel in west Africa, where he’s based. He clearly knows the region back to front, and as his piece makes clear, the outlook isn’t good:
Africa’s cocoa makes the world’s chocolate, its fish, fruit and vegetables reach tables around the globe and its oil powers vehicles and factories from China to the United States. Yet far from benefiting from soaring commodity prices, African states are being squeezed as hard as any by the costs of fuel and food imports. Their desperate moves to cushion the impact for potentially restive populations threaten to wreck already stretched budgets, slashing receipts and swelling state spending.
As far as I can tell from the rough tally I’ve been keeping over the last few months, west Africa’s been one of the regions hardest hit by civil unrest related to food and fuel inflation, and Pascal’s article seems to confirm this. As a result, many governments have been under pressure to subsidise prices for both. Problem is, that doesn’t do their exchequers any good at all – quite apart from the inflationary impact of such measures.
The unplanned contingency measures, on top of global food and oil prices far above what most imagined a year ago, are wreaking havoc with governments’ finances. “This trend is throwing the budget out of gear,” Ghana’s President John Kufuor lamented last month when he unveiled a package of actions to mitigate the price rises …
As I argue in Pascal’s piece, the expense of subsiding goods across the whole economy, coupled with the inflationary impact, are two of the reasons for the current enthusiasm for social protection systems – be they food aid, vouchers or straightforward cash transfers – that are targeted at the poorest people. Expect to hear a lot about such ‘social protection systems’ at this week’s UN food summit.
But there’s a catch, too: in many places, the infrastructure for administering these systems just isn’t in place. Helping countries to get it set up has to be a top priority for donors – starting right now.
by Alex Evans | Jun 2, 2008 | Climate and resource scarcity, Economics and development, Global system
Here’s a question I’ve been wondering about for a while now. Just how much of an impact are soaring oil costs having on international trade through making it more expensive to ship freight? And if oil costs keep rising – to $200 and beyond, say, as some analysts reckon could happen by the end of the year – is there a risk that transport costs could in effect start to roll back globalisation’s relentless advance over the last few decades?
Last week, courtesy of John Robb, I found the first serious attempt I’ve yet come across to answer that question, from Jeff Rubin and Benjamin Tal (both at CIBC, an investment bank) – see pdf here (scroll down to page 4). And it’s pretty powerful stuff, right from the first sentence, which says bluntly: “Globalisation is reversible.”
The authors say that every one dollar rise in world oil prices translates into a one per cent rise in transport costs. And as freight costs rise steadily upwards, they argue, what’s in effect happening is a de facto reversal of the tariff reductions that have been painstakingly negotiated in international trade rounds.
Back when oil prices were $20 a barrel, they explain, transport costs were the equivalent of a 3% US tariff rate. But at $150 a barrel – just $15 or so higher than oil today – the equivalent tariff rate goes up to 11% – “going back to the average tariff rates of the 1970s”. And $200? “We are back at ‘tariff’ rates not seen since prior to the Kennedy Round GATT negotiations of the mid-1960s.” So with this kind of economic impact, the authors continue, markets will seek shorter, and hence less expensive supply lines – which is “precisely what we have witnessed in response to past OPEC oil shocks”.
Now think about what this means for economies that – like China and India – have emerged by exploiting their cheaper labout (albeit that wage costs have more recently been rising sharply in both countries). China’s steel exports to the US, they say, are now falling by 20% on a year-on-year basis – and they think that’s not only because of the slowing US economy, but also because cheaper Chinese labour is starting to be offset by the sheer cost of transporting the steel across the Pacific. Bottom line:
“In a world of triple-digit oil prices, distance costs money. And while trade liberalisation and technology may have flattened the world, rising transport costs will once again make it rounder.”
Although Rubin and Tal don’t get into the effect on food prices specifically, the drivers they discuss are profoundly relevant for the longer term food outlook. More on that in a future post.
by David Steven | Jun 2, 2008 | Conflict and security, Europe and Central Asia, South Asia
Commenting on today’s ‘cartoon bombing’ in Islamabad, Pakistani blogger NB argues:
Calling this an an attack on the Danish Embassy is a little misleading. It should be called an ‘Attack on Pakistani Civilians Standing Outside the Danish Embassy’.
The eight casualties are said to include an Embassy employee – but he was a local cleaner, not a diplomat…
by Richard Gowan | Jun 1, 2008 | Climate and resource scarcity, Conflict and security, Cooperation and coherence, Europe and Central Asia, Global system, Middle East and North Africa
On Saturday Bernard Kouchner showed why he’s Europe’s Coolest Foreign Minister by swooping into Nasiriya, Iraq, just after a shoot-out to offer reconstruction aid. Part of me thinks “about time” given that (as I pointed in January) French aid to Iraq has been pretty piffling to date. But this gesture provides timely proof of a trend that Daniel and I highlighted in a piece on the ECFR website on Thursday: the emergence of a new consensus in Europe on the need to do more for Iraq.
European diplomats have privately admitted for some time that they could not ignore Iraq forever. But in recent weeks, private talk has given way to public statements. A visit by Iraqi Prime Minister Nouri al-Maliki to Brussels in April proved a catalyst: the European Commission trumpeted its desire for “an energy security partnership”.
Getting from private to public statements is a step forward. Shifting from rhetoric to real engagement in Iraq will be an even bigger one. What such engagement will look like is uncertain but parts of it are clear. More, better-targeted aid? Yes. Assisting UN mediation? Yes. Support for what Barack Obama calls a “diplomatic surge” across the Middle East? Absolutely. New troops? Not a chance.
Regular readers may faintly recall that I’ve banged on about this whole EU-Iraq thing before, picking up on a February report from the European Parliament that advocated greater engagement. It is actually one of the few issues on which the authors of this blog fundamentally disagree, as evidenced by a somewhat tipsy argument on the topic between Alex and I at Odeon some months ago. Alex thinks (as far as I can recall) that the EU isn’t relevant to Iraq, and shouldn’t try to be. Daniel and I think that it has do more, partially for humanitarian reasons but also to avoid Middle East meltdown and improve post-Bush transatlantic links.
Up until the start of this year, making this case was a rather lonely business (although I should immediately add that there have been people making it far longer than I – Richard Youngs published a great paper on the subject back in 2005, for example). But it is finally getting traction among the commentariat.
Check out Pierre Schori’s piece for ECFR and (as it’s not just people involved with ECFR that believe this stuff) this Guardian online op-ed by Berlin’s Thorsten Benner. And Guido Sternberg of SWP, also in Berlin, has said wise things on the subject for Der Spiegel online. OK, that’s not exactly a flood of commentary in favor of all-out support for Iraq, but it’s a start. I’ll keep you updated as it grows.
UPDATE: our ECFR piece has now received various comments, one of them linking to this interesting online symposium on why Iraq is a European security issue, published late last year. Good stuff.
by Richard Gowan | Jun 1, 2008 | Europe and Central Asia, Influence and networks
As Alex notes in the post immediately below, new social networking technologies can be forces for good or evil. I’ll leave you to decide which category the EU’s new idea for a Political Facebook open to Europe’s 20,000 parliamentarians falls into:
Myparl.eu – officially to be launched in October – is a website currently under construction that aims to work along the same lines as the popular MySpace or Facebook social networking services, but in addition to linking social contacts is supposed to foster debate about legislative proposals coming both out of Brussels and from national parliaments.
The first official talks on the project, which is sponsored by the European Commission and will receive EU funds, took place in Brussels on 28 May involving MEPs and 27 national co-ordinators. Daniela Vincenti Mitchener, editor of the site, told EUobserver the project is about “creating a transnational community of ideas” and that it will alert MPs to MPs in other countries “who are thinking alike.”
The project could potentially involve up to 20,000 people, including politicians from regional governments and parliaments. Myparl.eu will put forward three main themes for debate – the future of Europe, climate change and intercultural dialogue.
