May 22 2009

By Pascal Lamy (*)

GENEVA, May (IPS) While the world could probably agree on basic objectives for our agricultural systems -adequate, nutritious, and affordable food, decent pay for farmers, and culturally and environmentally-sensitive production – we still disagree on what global integration could bring to this process.

To my mind, global integration allows us to think of efficiency beyond national boundaries and to score efficiency gains on a global scale by shifting agricultural production to where it can work best. While some countries find themselves on fertile lands with sunshine and freshwater, others are condemned to arid and inhospitable terrains.

As I often say, if a country like Egypt were to aim for self-sufficiency in agriculture, it would soon need more than one River Nile. In other words, global integration must allow food, feed, and fibre to travel from countries where they are efficiently produced to countries where there is demand.

But there are other powerful reasons for trade too; such as differences in the relative efficiency of production (otherwise known as comparative advantage), and geographical proximity.

Despite this trade reality, countries continue to disagree on whether agriculture is like shirts, shoes, or tyres, and should fall under the same trade regime. Hence, the specificity of agriculture in the World Trade Organisation (WTO) rule-book. It made its entry into that rule-book about 50 years after industrial goods, and managed to come
in on different footing. For example, export subsidies, which are completely prohibited for industrial goods, are yet to be phased-out through the Doha Round in the area of agriculture. Whereas the world’s trade-weighted average industrial goods tariffs is about 8 percent, in agriculture it is 25 percent. Not to mention tariff peaks, which in agriculture still reach as much as 1000 percent.

This fundamental divide took on a different dimension in last year’s food crisis. In response to the crisis, some countries turned further inward, introducing a host of export restrictions. Others started looking outwards more than they ever had before, seeing their food security endangered by their dependence on imports. Unique to this situation was the fact that countries on opposite sides of the export barriers all complained of the same thing: hunger. Hence the current phenomenon of the purchase of agricultural land abroad -dubbed “land grabs” by some.

International trade was not the source of last year’s food crisis. If anything, international trade has reduced the price of food over the years through greater competition and enhanced consumer purchasing power.

International trade in agriculture comprises less than 10 percent of world trade. Whereas 50 percent of the world’s production of industrial goods is traded internationally, only 25 percent of world food production does. In addition, of that 25 percent, the vast majority is processed food, and not rice, wheat, and soya, as some would like to claim. To suggest that less trade, and greater self-sufficiency, are the solutions to food security, is to argue that trade was itself to blame for the crisis – a proposition that would be difficult to sustain in light of those figures.

Despite the absence of a shared vision on agricultural trade policy, the world is moving in the right direction, though our job is by no means done. Between 2000 and 2007, agricultural exports by developing countries to the developed grew by 11 percent per year; faster than the 9 percent growth in trade flows in the opposite direction. This trend is a move towards redressing historical imbalances and levelling the international trade playing field.

The developing world’s international competitiveness in agriculture is becoming an undeniable reality. Today, the developing world tops the charts in kg/hectare of sugar cane, sugar beet, rice, wheat, maize, and other commodities too.

While we have yet to agree on a common vision for agricultural trade policy, the progress that the world has made is important. Global integration has fuelled economic growth and led to efficiency gains, and it must continue. But why then is there such widespread resistance to trade opening? To me the answer is clear: we have yet to build robust safety-nets for the world’s poor. Each and every government must turn its attention to this issue. In the absence of such safety nets, there will always be resentment at a time of crisis to a country’s food supply going abroad.

Trade policy cannot and does not, by itself, answer each and every challenge in agriculture, not least because, at the end of the day, trade is no more than a simple transmission belt between supply and demand. It has to work smoothly, but it is simply one element of a much more complex machinery. (END/COPYRIGHT IPS)

(*) Pascal Lamy is Director-General of the World Trade Organisation (WTO).

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