Answers to the global food crisis

Many commentators have been telling us for sometime that the global food crisis is upon us. An obvious question to ask, if they are right, is what to do about it. Arvind Subramanian has a column at VoxEU.org where he tries to answer that question. In his piece, The global food crisis: A toolkit for audacious leaders, Subramanian suggests some medium-run measures to help the situation. Subramanian writes

Collective action is necessary to “fix the incentives” facing agriculture globally. This entails scrapping policies that encourage farmers to turn land away from food production and revitalising the WTO by ensuring that it plays a role in solving the challenges in global agricultural markets brought to the forefront by the food crisis.

Policies that stimulate production of biofuels have diverted of land away from food production. More knowledge on the overall contribution of biofuels to sustainable development is absolutely essential, but there already exists strong evidence indicating that the US corn-based ethanol program has contributed to raising food prices, and there are also doubts that corn-based ethanol constitutes the best alternative fuel program, on environmental grounds. Meanwhile, oil prices at $125 a barrel have undermined the original rationale for the program by providing sufficient incentives and anchoring the competitiveness of corn-based ethanol. It is therefore unnecessary and misguided for the United States to insist on maintaining aspects of the ethanol programme that are tantamount to “picking winners” – such as ethanol mandates or high tariffs on competing fuels – in light of the current food crisis. Their elimination would constitute better food policy as well as better environmental policy.

Export restrictions in food-exporting countries are a doubly harmful reaction to food price increases, and they constitute a prime example of contemporary problems in global agriculture not properly managed by current or prospective WTO rules. First, export restrictions add fuel to fire as they nourish increases in world food prices – for some commodities, restrictions on export provide an extra boost to prices of up to 20 percent. Second and more importantly, export restrictions numb the incentive of farmers to do the necessary investments to augment production.

Export restrictions also highlight the weakness of the global agricultural trading regime. Lack of access to markets in good times and export restrictions in bad times are self-reinforcing phenomena that foster strategic action at the cost of the common good. We need a system capable of ensuring that both imports and exports remain free to flow in good and bad times. Pledges to revitalise the Doha Round alone will not do the trick, even if they help jump-start negotiations. Currently, the round has been devoted to traditional forms of agricultural protection such as tariffs and subsidies. We need to enlarge the agenda to include discussion on all trade barriers, including export restrictions, biofuel policies, and regulations on genetically modified organisms, so as to ensure that the world trading system remains capable of tackling contemporary challenges in world agriculture. If Africa is to exploit new agricultural technologies, policies toward genetically modified organisms, especially in the European Union, need to be clarified, made transparent, and rendered immune from protectionist pressures. The United States and the European Union should provide leadership in heading an international effort to bring about a collective agreement.