World Food Security and Agricultural Trade

by Yannick Jadot
Solagral, France

Like environment and rural employment, food security is very much a global issue, in the sense it does concern every country in the world. It was one of the raisons d'être of the Common Agricultural Policy (CAP), even if now, probably because self-reliance is achieved, food security does not appear much in EU papers. It is strongly claimed as a right by developing countries and by some developed countries.

As explained by Mr. OHGA, food security, in the sense of food sovereignty, can enter into contradiction with free trade of food and with the liberalisation process engaged in WTO. Mr OHGA gave many good reasons that I am not going to repeat. But it is important to recall that there is not one country which would be ready to abandon food sovereignty (neither the US nor the members of the Cairns Group, nor the EU) and that it is easier to speak about comparative advantage once a high degree of self-reliance is achieved.

Food security may therefore be a key issue in the next negociations for building up international alliances on the multifunctionality of agriculture, especially with developing countries. The alternative to " everybody for himself " (free trade) cannot be " everybody stays within his own house " (national self-reliance). This point of food security as a issue shared by North and South is central in my contribution.

Some points of context before, which I think are quite important in our debate.

1. Long term food security will not be automatically solved by the simple effect of increased supply. The increase in supply over the next decades will be unequally distributed round the world. Particularly Africa, and countries in South Asia, Latin America, the Middle East and North Africa are likely to suffer from persistent overall deficit.
2. Economic growth alone will not guarantee access from individuals and families to wholesome food in sufficient quantity at all times and in all places. Food security depends on access to means of production and to income ; it is a matter of fairness and social justice as much as of growth in wealth. Even if the number of people suffering from food insecurity may decline in relative terms, their absolute number will increase. Poverty and material and political insecurity are the determining factors in this increase. I Won't talk much about access to food, but I think this is something most important that is missing in Mr. Ohga's paper.
3. In general, WTO is dealing less and less with tariffs (still in agriculture) and more and more with standards (SPS, TBT, environment, …) and rules (intellectual property rights, investment...). Consequently, negociations are increasingly focussing on national and regional policies, e.g. agricultural policy. These standards and rules are based on collective preferences, political and cultural contexts, and so are the expression of national or regional sovereignty. Since WTO wants to harmonize them, conflicts arise, in particular about public goods.
   
   Food security is indeed a public good : neither States nor national or international markets are able by themselves to ensure food security. Only the combination and coordination of private and public activity can provide the public good that is food security. Like education and healthcare, food security is a good whose benefits are widely circulated within the economy. No private or public mechanism for allocating resources for the production or distribution of food can by itself ensure a satisfactory balance. Complementarity must be sought between markets and institutions.
4. Last point of context : Liberalisation is supposed to bring flexibility and responsiveness of supply. The US FAIR Act too was supposed to bring responsiveness to market signals. What do we see ? Despite the present crisis, despite an estimated decrease of 20% of the average prices of cereals in 1998/99 compared to 1997/98, productions should increase a little bit, creating more surpluses. According to me, two of the lessons of the farm crisis in US are, first, that decoupling as it is applied is a rather virtual concept, particularly in a period of crisis, and, second, that flexibility of supply is a limited concept in agriculture.

Having said so, I would like to raise two issues which both relate to tools.

The first one is about availability, which forms with access and stability the three components of food security.

Availability or adequacy of food depends on a combination of production, stocks and imports.

Mr. Priyadarshi has clearly indicated that imports are not perfect substitutes for national production. Especially in agrarian countries, production means development, employment, incomes and so access to food, and so on. Korea also recounts that when hit by the financial crisis in late 1997, Korea's banks lost credit, and this completely stalled their agricultural imports. Other countries also underline that in a case of world food shortage, the poorest countries could be forgotten in world supply. A certain self-sufficiency (that is to say a reasonable level of domestic production) is therefore needed.

What are the tools now available to support production ? Tariffs barriers are a determinant one. Decoupling is now the key word, and indeed the key to enter the Green box. But it supposes budgetary supports that developing countries have not. For example, how have the farmers confident and make them invest without some kind of price stabilization ? South Korea points out that while developed countries argue that NTCs are incoporated in the Green Box, the specificity of the requirements do not in fact fit the needs of other member (developing) countries and so prevent them from effectively addressing their non-trade concerns. That is why several developing countries are requesting the setting up of a Food security box. There is a risk here of separating food security from the other non trade concerns.

The second point I would like to raise is the link between national and global food security, and especially the question of market instability.

Since 1974, the instability of agricultural markets has become permanent. The practises of cooperative oligopoly in a number of major markets have given way to more antagonistic strategies. Although trade in the staples of food security is still subject to public intervention, the nature of that intervention has changed, and no country will at present take on the responsability for stabilizing world prices.

If we look at net importing countries, and specifically the developing ones, this instability caused no particular problems for them until the early 1980s. Tools of trade policy, farm or food policy largely insulated their markets from international fluctuations.

Since the early 1980s, the situation has changed, since the net importing countries, like most other developing countries, have generally opened up their economies and reduced public intervention in agriculture. Moreover, exporting countries have substantially reduced the amount of food aid (except for 1998 in US) and of subsidised exports. Consequently international instability has become a matter of concerns, some experts considering that instability can involve major costs, especially when private or public actors have to devise long-term strategies, e.g. for food security. Relative stability is often a condition for agricultural development and produces many positive effects on the rest of the economy.

The international debate on this subject is a difficult one. There is no solution centralised on one country or group of countries which can be envisaged that would be advantageous in the light of the costs incurred (particularly storage) . The countries which acheive this stabilisation by themselves may now be deprived of this possibility either by their international commitments or for domestic economic reasons. What needs to be examined, therefore, is a set of solutions sufficiently decentralised to reduce the cost of managing instability. One solution for managing instability in the short term, often proposed to developing countries, is the creation of insurance mechanisms for private and public actors. For many low-income countries, these solutions are expensive to apply and have not been successful so far. To meet this difficulty, some experts suggest setting up an insurance fund common to a number of countries, which could be partly financed by the developed countries. Others envisage solutions closely linked to trade policy (like variable levies), which bring us back to WTO rules.

To conclude, since the combination of production and imports is a key issue for food security for most countries, the link between national and global food security cannot be avoided, nor the link between national agricultural policy and the global food security. One of the aspects of this link is the regulation of world markets. The way to combine the aspects of access to market, tools for domestic support, direct and indirect supports to exports, stability of world markets and food aid strategies will be central if a compromise on NTCs between food exporting and food importing countries is to be reached. Food aid, because of its many bad effects on local markets, cannot be a structural and fair solution to supply developing countries.

The compromise should be based first on the respect of countries' food sovereignty, second, on the necessity of trade to ensure world food supply on fair conditions, in terms of quantity, price, quality and, I will add, in terms of structure of supply on world markets. Third, this compromise requires a coherent approach of all of us, not only on the points I just mentioned, but also in the different negociating fora : Agreement on Agriculture of course, but also the London Convention, SPS and intellectual property rights agreements which are strongly linked to food security.