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The G20 Summit and a regional approach in West Africa to food security and price volatility

19 December 2011

The G20 Summit held in Cannes in November 2011 endorsed the approach adopted by G20 agriculture ministers in June 2011 for dealing with price volatility and global food security challenges. Some 12 of the 95 paragraphs in the final November summit statement deal with these issues. The Summit communiqué calls for ‘a more stable, predictable, distortion free, open and transparent trading system’, since this ‘allows more investment in agriculture’. The importance of ‘mitigating excessive food and agricultural commodity price volatility’ was highlighted.

The Summit made a commitment to concrete actions around the five planks of the G20 Agriculture Ministers’ action plan of June 2011. This included a commitment to ‘invest in research and development of agricultural production’ and pressing ‘multilateral development banks to finalise their joint action plan on water, food and agriculture’. The launching of the Agricultural Market Information System (AMIS) and the Rapid Response Forum in September 2011 were welcomed. A commitment to ‘the development of appropriate risk-management instruments’ was also reiterated, as was the commitment to removing ‘food export restrictions or extraordinary taxes for food purchased for non-commercial humanitarian purposes by the World Food Program’. A commitment to working in the WTO to achieve this end was made at the Summit.

As part of the follow-up to the G20 Agriculture Ministers’ meeting, the World Food Programme has developed a proposal for a regional food reserve in West Africa. This would involve the establishment of a ‘physical reserves for 30 days, or 67,000 metric tons of grains, and would be supplemented with an additional 60 days of virtual reserves for a 90 day total’.  The physical reserve would be held ‘in four locations – Burkina Faso, Ghana, Mali and Senegal – with a mix of inland and sea port placement’.

The aim of the scheme is to give ‘poor food-deficit countries rapid access to sufficient physical food for distribution through schemes of targeted assistance, such as safety nets’. The reserve would cover stocks of maize, millet, sorghum and rice. The regional scheme is intended to:

  • ‘complement and integrate national, regional and continental and global food security mechanisms’;
  • ‘operate with the active participation of the countries and region concerned taking into account the aid effectiveness principles’;
  • build national and regional capacity to manage food stocks;
  • prioritise local and regional procurement of food.

An initial establishment cost of US$44 million is envisaged, with annual recurrent costs of US$16 million.

Analysts from the US-based Institute for Agriculture and Trade Policy suggest that some G20 governments are seeking to place unnecessary restrictions on the operation of the scheme, including on the size of the reserve, the trigger mechanisms to be used to release stocks, and the channels through which food can be distributed. It is maintained that many of these conditionalities reflect US concerns that nothing should interfere with the operation of commercial markets – markets which, according to IATP, operate highly imperfectly in West Africa (and many other ACP regions).

In this context there is concern that these kinds of conditionalities and limitations could undermine the establishment of food reserve facilities that respond to ACP governments’ concerns over rising prices and price volatility by countering the worst effects of market failure.

There are particular concerns about the ‘trigger mechanism’ to be used to release supplies and funds, with analysts pointing out the strong domestic sources of price volatility in the region which ‘have little relationship to international prices’. In this context, the use of international price triggers would be inappropriate and could ‘destabilise domestic prices’.

There are also concerns about the link between the regional reserve and national reserves, as well as the weak links to ‘the purchasing of food from local smallholders’. The ICTSD analysis notes that ‘funding for the reserves system will be a critical issue’: ‘neither the G-20 ministerial declaration nor the WFP proposal explain how or where the resources required will be gathered’, although the 75% of the establishment costs linked to physical procurement of grain could probably be drawn from food aid budgets.

More broadly, in November 2011 it was reported that a major food crisis was emerging in the Sahel, affecting up to 7 million people in Niger, Chad, Mali, Mauritania, Nigeria and Burkina Faso. In response, the EC increased emergency assistance to the region by over 22% (adding a further €10 million to an existing allocation of €45 million).

Editorial comment

Concrete actions through other institutional forums are central to taking forward the June 2011 G20 plan of action. The role of the G20 is essentially to give political support to the practical elaboration of these concrete activities. In this context, the extent to which the policy preoccupations of major OECD players can come to influence the elaboration of concrete actions is a source of some concern. A case in point is the West Africa food security pilot project, where IATP has argued that some G20 members are seeking to place unnecessary restrictions on the operation of the scheme, in the light of existing international commercial trade links.  

However, for regional food security reserves to function effectively in terms of facilitating the functioning of intra-regional cereal supply chains, it is important that their modalities are consistent with regional needs and regional market realities. If the regional facility is perceived to lack sufficient stocks to meet emergency needs (also taking into account national stocks), or the release of stocks is not closely tied to regional market realities,  then regional governments are likely to continue to resort to national trade restrictions during times of production shortfalls.

The types of trade-disrupting measures that are adopted in response to food supply concerns are vividly illustrated by the experience in East Africa, where in the face of worsening regional food shortages, the Tanzanian government introduced an export ban in July 2011. The prospect of such trade policy measures would be likely to inhibit the development of intra-regional cereals supply chains, undermining efforts to ensure that food supplies flow from food-surplus to food-deficit areas. This in turn could undermine regional production during times of market stress.

A lesson already emerging from the West African pilot project is thus the importance of ensuring that such schemes are based primarily on regional realities, rather than on the trade priorities of major G20 grain exporters.  These types of operational modalities will be critical in determining the extent to which the G20 Action Plan actually delivers benefits to ACP countries.

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