Trade Solutions to the Global Food Crisis?

Part of the contextual debate in the run up to the WTO’s mini ministerial meeting in July 2008 centred on the possibility of an agriculture deal making a worthy contribution to solving the global food crisis. This is a particularly relevant question in the African context and as such Hilton Lambert is participating in a regional study on the topic as part of the Trade Knowledge Network (Southern Africa).

There are certain elements of the agricultural trade agenda where Africa has a particular interest. These are focussed primarily on market access issues, especially as regards preference erosion and exemptions from reduction commitments. On the reverse of the inward focus on market access, Africa has a vested interest in supporting the newly strengthened text on disciplining export restrictions from food exporting nations. Secondary are the domestic support considerations on subsidies and their negative link to fostering local productive capabilities. Food security issues through food aid disciplines are essentially present in the export subsidy disciplines, which seem to amiably cater to food aid emergencies using the new safe box.

Policy measures available in the short run include the provision of safety nets and social protection to the most vulnerable consumers in both rural and urban areas, as well as the enhancement of short term supply response by smallholder farmers. Improved trade policies can also yield important gains, using the existing and emerging WTO rules. In the longer run, it will be important to address the fundamentals that increase investment in agriculture, both public and private, and improve the functioning of markets. Implementation of these policies offers the best option for putting the world on track to reach the World Food Summit target of reducing hunger by half by 2015 despite food price increases.

What is clear is that in a period of rampant global commodity prices, and more so a threat of shortage; the mere presence of domestic production does have a quasi-calming or dampening effect on the domestic market price. For this reason a trade policy agenda that weans Africans from subsidy dependence would be a sound approach.

With the July 2008 WTO mini ministerial meeting gridlocked in the arcane nature of the negotiating texts to hand, there seems little chance that the Doha Round is going to be settled in 2008. To compound this mid year setback, political events in the US in the second half of the year will serve to refocus attention away from the Geneva agenda. The upcoming presidential election in the US in November 2008 is likely to place a damper on any really serious WTO negotiations after August 2008, being the WTO’s traditional August summer break, which is honoured like a grail by trade negotiators. Concluding any outstanding business on the WTO deal and sealing a new multilateral trade pact is unlikely to feature prominently on the priority ranking of the new US administration, Democrat or Republican, faced with rising protectionist sentiment within the US. This sentiment will have to be appeased in any lucid political campaign serious about garnering votes.

There is also a growing suspicion that there are in fact no worthy gains for Africa in this Round. The predictions of the econometric models traditionally used to project the impacts of trade reform have undergone major revisions during the course of the negotiations. They now predict rather frugal gains from the Doha Round, especially for Africa. While it is perhaps premature to base a definitive negotiating response on the fickle nature of these models, in practice these findings obviously dilute the incentives for politicians in Africa to seek an ambitious, rapid outcome. Africa may thus well find that a ‘no deal’ outcome is not completely unpalatable. Indeed there are touches of the African veto of a Doha deal at Cancún, Mexico, back in 2003 that resonate presently.

In taking stock as to where future energy might be focussed it has been noted that the World Bank’s 10 point plan is highly pertinent in the present instance as it has many Africa-focused elements and may well be a guide to African policy responses to the food crisis, especially as far as trade measures are concerned.

1. Fully fund the World Food Programme’s emergency needs
2. Provide support for safety nets for those in severe distress.
3. Provide seeds and fertiliser for the coming planting seasons.
4. Reverse years of agricultural underinvestment.
5. Increase the private sector’s ability to work across the value chain.
6. Develop innovative instruments for risk management.
7. The US and EU must reduce agricultural subsidies.
8. Remove export bans that have led to even higher world prices.
9. Conclude a Doha WTO deal in order to remove the distortions.
10. Collective action to counter global risks in the world economy.

These are likely not a panacea in and of themselves, and it will likely be useful to investigate to what extent these factors are being taken up at country level in terms of policy responses. It is also notable that many of these elements resonate with the WTO’s own ‘Aid for Trade’ mandate and are thus not entirely new within the African discourse.