Why Doha progress would mean even higher food prices

by | Apr 21, 2008 | Climate and resource scarcity, Global system

So far, most of the consensus on what to do about food prices is (as you might expect) strongly focused on the short term: measures like spending more cash on humanitarian aid, or building up social protection systems for the poorest and most at risk.  But one medium term measure also seems to command widespread consensus: we should press ahead with the Doha trade talks. Here’s Bob Zoellick at the World Bank, for instance:

If ever there is a time to cut distorting agricultural subsidies and open markets for food imports, it must be now. If not now, when?

Peter Mandelson, meanwhile, opines that “without a doubt” a trade agreement would help to restrain spiralling prices.  And for once, this is something where he and Gordon Brown agree: Brown’s recent letter on food prices to G8 heads has trade as the very first action point, noting that

We should surely redouble our efforts for a WTO trade deal that provides greater poor country access to developed country markets and cuts distortionary subsidies in rich countries.

Now you can’t fault the political opportunism here, of course: part of the reason for the push on liberalisation now is that, as food importing countries frantically slash their import tariffs to try to keep the grain flowing in, they’re also achieving liberalisation where trade negotiations have failed. 

But what effect will all of this have on food prices?  If the US and EU start eliminating their subsidies too, isn’t there a risk that the short term impact could be to increase food prices to poor consumers?  Why yes.  Indeed, Gordon Brown actually says as much in his letter to G8 heads [emphasis added]:

…in the short term net food-importing countries may need support to cope with higher prices as a result of liberalisation…

Building Resilience – RUSI

by | Apr 17, 2008 | Climate and resource scarcity, Conflict and security, Cooperation and coherence, Global system, Influence and networks

Today, I gave the closing address at the RUSI conference, Protecting the Critical Infrastructure, in a session introduced by RUSI’s head of risk and resilience, Anthony McGee. From the introduction to the conference by RUSI’s head, Professor Michael Clarke:

Protecting the Critical National Infrastructure and ensuring the continuation of political, social and economic activity is vital to the UK. As a modern ‘just-in-time’ society is becoming increasingly dependent on goods and services distributed through critical infrastructure, so the potential consequences of disruption to that infrastructure become more serious.

However, the increasing importance of well protected, resilient infrastructure is matched by the growing complexities and interdependencies of a CNI which is spread across sectors and nation states. Relationships between stakeholders are somewhat disjointed, the ownership of risk is unclear and yet the consequences of failure are potentially catastrophic.

Most of the speakers got stuck into the nitty gritty of how infrastructure fails and why – with last summer’s catastrophic floods as exhibit A. My job, however, was to take a somewhat broader view of resilience at a time when the old ‘command and control’ paradigm is failing…

The talk draws heavily (of course) on my collaboration with Alex Evans, but also on work with the economist, David Bloom. Also there’s quite a overlap with these GD posts. Full text after the jump (or here as a pdf).

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Re: Ways in which we are screwed #94

by | Apr 13, 2008 | Climate and resource scarcity, Conflict and security

A propos of David’s post, here’s what’s scaring me witless this weekend:

The Ug99 strain of the killer wheat fungus (stem rust), which recently infected wheat farms in western Iran, is a serious threat to global food security, agricultural scientists have warned. They have said the fungus may affect additional wheat-producing countries.

Mahmoud Solh, director-general of the International Centre for Agricultural Research in the Dry Areas (ICARDA), was quoted in a 20 March ICARDA press release as saying that he and his fellow scientists were convinced that Ug99 would quickly spread beyond Iran and that, with the long distance travel of rust spores, Ug99 would soon affect farms in the Middle East, Central Asia, South Asia and East Asia.

Richard Brettell, director of the Biodiversity and Integrated Gene Management Programme at ICARDA, told IRIN on 26 March that halting the spread of the stem rust spores is difficult since they are dispersed by the wind. “The fungus can to some extent be controlled by the application of fungicides [as a spray]; however, these need to be applied at an early stage of infection before the disease takes hold,” he said.

Brettell said the most effective way of controlling the disease is to grow resistant varieties. But he warned: “The problem is that almost all the wheat varieties grown in West and South Asia are known to be susceptible to Ug99. It will take time and coordination to replace them with resistant varieties.”

From financial services to food: liberalisation’s high water mark

by | Apr 12, 2008 | Climate and resource scarcity, Global system

A couple of weeks ago, Martin Wolf penned an FT op-ed proclaiming that the rescue of Bear Stearns “marked liberalisation’s limit”.  We should remember Friday March 14th 2008, he said, for it was “the day the dream of global free- market capitalism died”: 

For three decades we have moved towards market-driven financial systems. By its decision to rescue Bear Stearns, the Federal Reserve, the institution responsible for monetary policy in the US, chief protagonist of free-market capitalism, declared this era over.

If the dream’s already over in financial services, food may be next.  Here’s Javier Blas in the FT yesterday:

Governments are racing to strike secretive barter and bilateral agreements with food-exporting countries to secure scarce supplies as the price of agricultural commodities jump to record highs, diplomats and cereal traders say.

Wheat traders said yesterday that Ukraine was close to an agreement with Libya to devote up to 100,000 hectares of its own land to grow wheat for the north African country. Kiev-based analysts questioned the feasibility of such an agreement after the former Soviet republic restricted its cereals sales earlier this year.

The discussions follow a barter contract signed between Egypt and Syria in which Cairo agreed to supply Damascus with rice in exchange for secure wheat cargos. The Philippines also sought unsuccessfully last month to reach a deal with Vietnam to secure a large supply of rice.

Abdolreza Abbassian, an expert at the Food and Agriculture Organisation in Rome, said: “The use of bilateral agreements is on the rise.” Diplomats also say that the recent bilateral and barter contracts signal a broader trend.

Meanwhile, import substitution is back too. Just look at the Philippines, one of the world’s largest importers of rice – where prices have risen by up to 70 per cent over the last year.  As the Manila Times set out last week, most of the Philippines’ rice comes from Vietnam, plus a little from Thailand – both countries that have reduced export levels as prices have shot up.  The result: the Philippines’ equivalent of the FBI is raiding warehouses looking for rice hoarders, and political tension is rising.

As Roel Landingin reported in the FT a couple of days ago, part of the backdrop to the current situation is that the World Bank strongly encouraged the Philippines to place its trust in world markets for rice:

Less than a year ago, the authors of a World Bank paper on agricultural spending in the Philippines posed a question that now looks prescient: “Can the world market for rice be trusted?” Yes, was their unequivocal answer. And so the authors urged Filipinos not to worry too much about their reliance on rice imports…

Leocadio Sebastian, executive director of the government-run Philippine Rice Research Institute, said recent events had shown that the reasoning behind the World Bank’s recommendation “may not be true any more”. The World Bank study argued that rice production and prices were now more stable and that governments in rice exporting countries could not easily restrict foreign sales.

So much for that plan, as they say.  Now, the talk in Manila is of self-sufficiency – within three years, no less: quite a reversal.  And while this is not the sort of agenda calculated to gladden the hearts of economists at the Bank, it does appear to have the approval of the UN’s Food and Agriculture Organisation, whose advice to poor countries yesterday was to “rely more on local produce to cut food import bills and provide subsidised inputs to boost production”, according to ReliefWeb.