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Food security & trade liberalization.

The rapid increase in prices of rice, wheat and other food commodities has sent a shockwave through poor households around the world. While food prices are always volatile, recent rises are of a magnitude last seen in the 1970s.

For this huge price hike, there are several causes: rising demand in large developing countries that have experienced growth in household incomes; neglect of agriculture in many developing economies over recent decades, leading to reduced supply; increased costs to farmers due to high fuel and fertilizer prices; competition from biofuels for land use; supply disruptions caused by drought in major agricultural exporting countries; speculation and an asset bubble in commodity markets; and the decline of the dollar, the currency in which many commodities are priced on global markets.

People are in the streets rioting over food and energy prices. The business world is in a state of shock over the financial crisis. These are the problems that governments have to focus on, and the Doha Round cannot help them.

People want global agreements to solve food insecurity, to get them out of poverty and to avoid the devastating effects of climate change. If trade can help these goals, it should be used. But the deal on the Doha roundtable was likely to make things worse.

The existing WTO and bilateral and regional trade agreements push across the board liberalization, which worsens volatility of food prices. This leads to increased dependence on international markets and decreased investment in local food production.

Trade liberalization has eroded the ability of a number of developing countries to feed their population, for example, Mexico, Bangladesh, Indonesia and Mali. The removal of tariff barriers has resulted in dumping of heavily subsidised commodities in developing countries, such as Ghana, Kenya, the Philippines, Jamaica and Honduras, while undermining local food production.

Developing countries have turned from net exporters of food to net importers of food. Two-thirds of developing countries are net food importers and are extremely vulnerable to volatile international food prices. The proposals under the current Doha Round were not very impressive and if those were approved, they will increase countries' dependence on food imports while further eroding their ability to feed their own populations.

High food prices provide enormous benefits to transnational agribusinesses and commodity cartels that control the trade in food and farm production. One of the largest global grain traders, Cargill. announced in April 2008 that its third quarter profits rose 86 per cent to $1.03 billion, in the midst of the global food crisis. Bunge saw its profits in the last quarter of 2007 increase by 77 per cent compared with the same period in 2006. The Doha Round, if concluded, will strength en die position of transnational companies in agricultural markets, who thrive on market deregulation.

The Doha negotiations do not focus on major challenges facing the global food system, which include climate change, natural resource depletion, the quadrupling of oil prices, the lack of competition in world commodity markets, financial speculation, and the rapid expansion of unsustainable agro fuels production.

Policy options: Governments and communities need lo have a range of tools at their disposal to build durable and resilient food and agricultural systems that are ready for the challenges that lie ahead. This includes a greater emphasis on policies that increase food sovereignty, encourage local investment in local markets, support sustainable small-scale farming, safeguard local production from dumping, implement genuine agrarian reform, and allow trade instruments such as quotas and tariffs. Some of these instruments are being proposed by a group of 46 developing countries known as G33 in the WTO's negotiations on Special Products and Special Safeguard Mechanism.


The volatility of agricultural prices must he addressed through national policies and global actions to avert food crises and Lo ensure small producers a reliable and steady income. Well-managed public stocks need to be reestablished. Such stocks provide an important buffer against price volatility and food insecurity. Speculation and extremely high prices forced upon consumers by traders and retailers must be controlled. At the WTO, the African group has a long-standing proposal on the need to allow commodity producing countries to make agreements among themselves in order to stabilise prices.

Governments should establish safety nets and public distribution systems to prevent widespread hunger; they have to provide financial support for the poorest consumers to allow them to eat. Governments must use the maximum of available resources within the State and from the international community.

A reform of the food aid system is needed to respond more rapidly and to allow greater flexibility in the delivery of food aid. Instead of dumping surplus agricultural production as "in kind" food aid, donors should provide cash to governments and aid agencies to buy local food.
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Author:Maqbool, Asif; Nawaz, Zeeshan
Publication:Economic Review
Geographic Code:1USA
Date:Mar 1, 2009
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