WTO rules and food insecurity in perspective
29 July 2012
According to a new report written by a former FAO expert and published by ICSTD, while the increased levels and volatility of food prices since the late 1990s ‘are related, in part, to the implementation of reforms agreed under the Uruguay Round’, current WTO rules do not prevent remedial action by affected countries and the international community. The contribution of the Uruguay Round to the problem was both direct and indirect. The direct effect of the rules leading to a reduction of structural surpluses in rich countries was a strengthening of world agricultural and food prices. But the effect of this on LDCs and net food-importing developing countries (NFIDCs) has been exacerbated by the indirect effect: food assistance, such as subsidised exports and food aid, ‘declined drastically’ (see Agritrade article ‘ Food aid too limited to support national food security’, 2 July 2012).
Cereals self-sufficiency ratios are around 90% and 70% for LDCs and NFIDCs respectively. For the former, a problem is that yields are only half of those attained by developing countries and one-third of those achieved by developed countries. There has been a sharp decline in the share of food aid in total imports of cereals (the largest food import item accounting for some 42% and 40% for LDCs and NFIDCs respectively) by these two groups. Food aid has fallen from close to 30% of imports at the beginning of the 1990s for the LDCs (and 8% for the NFIDCs), to about 8% in the last 3 years for LDCs (and less than 0.5% for the NFIDCs). According to the ICSTD report, ‘the escalating burden of food imports, necessary to meet immediate consumption, represents a serious threat for the economies of most LDCs and NFIDCs.’
The ICTSD paper reviews the options available to food-insecure countries to mitigate their problems and to the international community to help them. Two types of border measure are quickly dismissed as often ineffective or undesirable. Cutting tariffs when import prices rise is a sensible response in principle, but ‘is severely limited when applied tariffs are already low as is generally the case in many poor countries’. Imposing export restrictions is ‘a blunt instrument’ that will simply transfer the problem to other countries and may have adverse medium-term consequences. In the view of the report, ‘there are always much more attractive approaches …which are also less costly.’
More effective responses are building up domestic stocks, which is not constrained by WTO rules (but is often constrained by cost), and reducing the high transaction costs for intra-regional trade. The report argues that ‘weak market integration in regions where the majority of net food-importing countries are located …adds to their vulnerability.’
Not least, poor countries must invest in agriculture and are not constrained in this by WTO rules. In this respect the news that seven African countries have attained the target established in the 2003 Maputo Declaration to devote at least 10% of their national budget to agriculture and rural development offers cause for optimism. However, this means that the rest (including all the major economies apart from Ethiopia) have failed to do so.
For the international community, the areas for support are clear:
- focus available levels of food aid on emergencies;
- target export credits on ‘liquidity constrained’ countries;
- strengthen food financing facilities;
- increase aid to boost productivity;
- rationalise biofuel policies.
None of these measures, as yet, faces WTO constraints.
Editorial comment
According to the latest FAO Food Price Index, which measures the monthly change in international prices of a basket of food commodities, global food prices dropped sharply in May when the index was 9 points down from April, at its lowest level since September 2011, and about 14% below its peak in February 2011. The implication of the ICTSD report and much analysis in the past year is that this is a temporary respite: the trend of prices will continue upwards even though there will be large cyclical variations.
This respite gives both poor food-dependent developing countries (which include many ACP countries) and the international community the opportunity to put in place measures to mitigate the effects of the next upswing. There is much that the international community can do to help – but the evidence is not encouraging that effective action will be taken. The failure of the G10 in 2011 to endorse most of the well-founded recommendations of the Inter-Agency Task Force that it called into being does not increase optimism. Even the origins of the ICSTD report fail to instil confidence: it is intended as background for the work proposed to the WTO in October 2011 ‘to mitigate the impact of the food market prices and volatility on LDCs and NFIDC’ which the eighth ministerial conference in December 2011 failed to adopt (see Agritrade article ‘ WTO Ministerial: a forum for small trade concessions’, 16 January 2012).
Food-insecure countries must do whatever they can to shore up their defences. The news that most African countries have failed to meet the Maputo targets shows that much more needs to be done domestically. In addition, it is not always clear that ACP policy positions in international fora fully reflect their long-term interests, for example, as the ICTSD report points out, ‘net food-importing countries should be enthusiastic proponents of approaches in strengthening WTO rules on export prohibitions and restrictions.’
