The WTO and the food crisis

By Michel Egger, Alliance Sud

Would a rapid conclusion of the Doha Round resolve the food crisis currently engulfing many developing countries? This at any rate is being argued by the heads of the major multilateral organisations such as the World Trade Organisation (WTO), World Bank or International Monetary Fund. Even Angel Gurria himself, Secretary-General of the Organisation for Economic Cooperation and Development (OECD) told the «le Temps» newspaper in early May that «amidst the profusion of expressions of sympathy, one important and immediate action to help resolve the crisis would be to conclude a new multilateral trade agreement». Trade liberalisation – so goes the reasoning – would stimulate production in developing countries, help to adjust supply to demand and bring down prices.

Trade is not all

The attempt to use the food crisis to get the World Trade Organisation out of the dead-end may be tactically smart. It is questionable, however, in that some part of the responsibility for the crisis lies with the very policy of liberalisation. Naturally, trade (along with many other measures) can help resolve the crisis. To assure food supplies, many countries are and will remain dependent on cross-border trade and the foreign exchange it generates. Quoted in the 23 May 2008 edition of the Paris daily «Libération», WTO Director-General Pascal Lamy said: «If the Egyptians were themselves to produce all the cereals they consume, there wouldn't be a drop of water left in the Nile». Yet claiming that the rapid conclusion of the Doha Round would solve the food crisis is an oversimplification, if not an absurdity.

First, the current crisis has multiple root causes, including many over which the WTO has no control (nor wishes to have any). In an interesting fact sheet, the US NGO Institute for Agriculture and Trade Policy (IATP) points out that the Doha Round will neither help curb speculation on commodity markets, bring down oil prices, get control of climate change, nor stop the biofuels boom.

Second, even in the highly unlikely event that the Doha Round were concluded rapidly, it would have no immediate impact on food prices. As is well known, it takes years for such agreements to be ratified, put into effect and enforced. The WTO contribution to solving the crisis would therefore be a medium to long-term one at best.

Third, the way the Doha agreement impacts the food crisis will depend crucially on what is agreed with respect to agriculture. What is at stake in the agreement on agriculture is nothing less than the right to food for all. The central question is how we will feed a world population of 9 billion mostly urban dwellers in 2050, in a manner that is environmentally sustainable and socially just. The G20, the group of leading agricultural exporting countries in the South, described their concerns in May as follows: «Circumstances in international agriculture trade have changed markedly since the beginning of the Doha Round in 2001. Rising food prices have led to growing concerns in developing countries about the food security of their populations. The Round should provide effective long-term solution to the current situation, taking into account the needs of developing countries.»

But how does one guarantee food security? What is certain is that this will not be achieved through ever more extensive liberalisation of food markets. The French Trade Minister Michel Barnier himself acknowledged to Agence France Presse that «the key lies not in more exports, but in producing more. If trade had eliminated hunger in the world, we would be aware of that by now.»

New agricultural policy required

What is really needed is a fundamental transformation of world agricultural policy, beyond agribusiness and the «historical strategical mistake» (Nicolas Sarkosy at the FAO Summit in Rome) made by multilateral organisations such as the WTO or World Bank, which for years have demanded that developing countries build up their export crops at the expense of self-sufficiency. What is also needed is a radical about-face involving, inter alia: support for small farmers, restoring the importance of local and regional markets, and promoting the traditional know-how of rural communities.

Central to this is guaranteeing food sovereignty. Individual countries must have enough policy space to be able to implement a policy commensurate with their needs and problems. Indonesia's WTO Representative Gusmardi Bustami put it this way: «The food crisis has taught the lesson that developing countries need to provide food for themselves and for food security, as they cannot rely on imports when there is a world shortage or increased prices. We therefore cannot only look at the short term. In the medium term, developing countries will still need the policy space so as to maintain the minimum comfort level of local farmers to achieve greater self-sufficiency in food production.»

Less subsidies, more protection

Can the Doha Round produce such a reorientation of the agricultural trade and of world agricultural policy? This is theoretically conceivable. According to Sandra Polaski, a researcher with the US think tank Carnegie Endowment for International Peace, a new agricultural agreement should contemplate the following:

• massive cuts in US and European subsidies, as they are leading to unfair competition and ruining farmers in the South. (The same demand was also voiced by UN Secretary-General Ban Ki-Moon and WTO Director-General Pascal Lamy at the FAO summit in Rome).

• allowing developing countries to shield at least 20 per cent of their agricultural output (the «special products») either fully or partially from tariff reductions in order to raise the incomes of farmers and boost rural development and hence food security.

• lastly, creating a «special safeguard mechanism» that would permit developing countries, in the short term, to raise tariffs above the level allowed by the WTO in response to sudden and massive import surges or drastic price fluctuations.

At the WTO, all developing countries are pressing for massive cuts in subsidies. The G33 (a group comprising 42 developing countries, most of them net agricultural importing countries) is calling for protective tariffs applicable to «special» products as well as the special safeguard mechanism for extraordinary situations. Some time ago already, the African countries had submitted proposals for the stabilisation of commodity prices.

Dampened hopes

It is yet to be seen how far the Doha Agreement will accommodate these concerns. In the agriculture negotiations, the latest draft of the «modalities», dated 19 May, gives little reason for optimism. It was rejected by the G33 and the ACP countries (African, Caribbean, Pacific), which are harder hit by the food crisis. As far as they are concerned, it takes far too little account of their proposals concerning food security.

As things now stand, a Doha conclusion might more likely further intensify the very policy of liberalisation that gave rise to the present mess. It would not provide the developing countries with the instruments and policy space they need so as to improve their supply situation. Such a likelihood is even less considering the continuing dogged refusal by the United States to dismantle its subsidies. The new farm bill approved by the Congress in May even provides for an increase in subsidies, which will amount to $290 billion (!) for the next five years. This will only further weigh down the already leaden wings of the Doha Round.


* * * * * * * * *

Box

Switzerland can do more

At the WTO major exporting nations from North and South are pressing for the further liberalisation of agricultural markets (see main article). Switzerland should not join in this clamour for liberalisation. For such market openings benefit agribusiness first and foremost and come at the expense of farmers producing food for local markets.

To contribute to solving the current food crisis and preventing any recurrence, Switzerland should instead embrace the following postulates in its trade policy and at the WTO:

• instituting a special safeguard mechanism that allows developing countries to protect themselves against rapid imports surges or sudden price fluctuations that jeopardise their agriculture and their food security.

• creating a category of «special» agricultural products which can be fully or partially shielded from tariff reductions.

• examining proposals by African countries for a commodity price stabilisation mechanism.

• suspending the tax waiver for imported agrofuels which came into effect on 1 July.

• supporting the call for an international moratorium on agrofuels production.

Contact: Michel Egger