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  • From: "Tradingpost" <tradingpost@lobo.net>
  • To: livingontheland@lists.ibiblio.org
  • Subject: [Livingontheland] Rising Prices Reinforce Need for Food Security Policies
  • Date: Tue, 15 Jul 2008 10:46:23 -0600


"Suddenly, the paradigm of food security has shifted back to the traditional
concept of greater self-sufficiency instead of relying on cheaper imports. In
the immediate period, emergency food supplies have to be shipped to affected
countries, but the long-term solution must include increased local food
production."

"The current food crisis has been precipitated by a number of factors
including climate extremes, such as the drought that has drastically cut
wheat harvests in Australia, the rising cost of inputs, especially oil and
oil-based products (fuel, chemical fertilizers and pesticides) and above all,
the switch of land use from the production of food to bio-fuels."


ISIS Press Release 15/07/08
Rising Prices Reinforce Need for Food Security Policies
http://www.i-sis.org.uk/risingPricesFoodSecurity.php

The new key to food security is self-sufficiency, not trade, and policies are
needed to expand local food production and invigorate the agricultural sector
particularly in developing countries

Food Futures Now , *Organic *Sustainable *Fossil Fuel Free, How organic
agriculture and localised food, and energy systems can potentially compensate
for all greenhouse gas emissions due to human activities and free us from
fossil fuels
Desperate measures to cope with soaring food prices revive debate over food
security

In response to rising world food prices, some food-importing developing
countries have lowered their tariffs to mitigate the high prices of imports.
At the World Trade Organisation (WTO), agricultural exporters are questioning
the need for the instruments of special products (SP) and special safeguard
mechanism (SSM) designed to protect food security, livelihood, and rural
development against trade. But the G33 group of developing countries and its
members say that their case for SP and SSM has grown even stronger, as the
food crisis is due to inadequate production in many developing countries,
forcing them to increase their dependence on imports that has now become so
costly.

Although importing countries can cut tariffs to reduce prices now, in the
longer term their farmers will need local markets and incentives for them to
revive agriculture production.

The current crisis has also revived the debate over food security. In recent
years, international financial institutions have promoted the view that
cheaper imports make local food production no longer a matter of necessity,
and many developing countries reduced food production on the advice of those
agencies.

The rise in food prices in the past two years has increased the cost of
imports and inflated food prices in local markets. This was exacerbated by
shortages experienced in countries placing import orders, for rice, for
example, only to find supplies cut by export restrictions. The ensuing street
protests in many countries have added a considerable sense of urgency to the
worsening situation.

Suddenly, the paradigm of food security has shifted back to the traditional
concept of greater self-sufficiency instead of relying on cheaper imports. In
the immediate period, emergency food supplies have to be shipped to affected
countries, but the long-term solution must include increased local food
production.

This raises the question of barriers to local food production and how to
overcome those barriers.
Barriers to local food production for self-sufficiency

The current food crisis has been precipitated by a number of factors
including climate extremes, such as the drought that has drastically cut
wheat harvests in Australia, the rising cost of inputs, especially oil and
oil-based products (fuel, chemical fertilizers and pesticides) and above all,
the switch of land use from the production of food to bio-fuels.

However, a more important contributing factor is the decline in agriculture
in many developing countries that has been happening over the past decades,
in most cases, due to the structural adjustment policies of the IMF and World
Bank. The countries were asked or advised to dismantle marketing boards and
guaranteed prices for farmers' products; to phase out or eliminate subsidies
and support for fertilizer, machines, agricultural infrastructure; and to
reduce tariffs of food products to very low levels.

Many countries that were net exporters or self-sufficient in numerous food
crops experienced a decline in local production and a rise in imports that
had become cheaper because of the reduced tariff. In addition, some imports
are from developed countries that heavily subsidize their food products.
Consequently, the local farmers were subjected to unfair competition, and in
many cases, failed to survive.
How Ghana’s agriculture was destroyed by the World Bank and the IMF

Ghana is a case in point. From the 1960s through to the 1980s its policies to
promote self-sufficiency in food had involved the government actively
encouraging the agricultural sector through marketing, credit and subsidies
for inputs. This had facilitated an expansion of food production for example,
in rice, tomato, and poultry.

But from the mid-1980s onwards and especially in the 1990s under World Bank
and International Monetary Fund (IMF) conditionalities - programmes for
economic and political reform attached to the provision of funds - the
policies for self-sufficiency were reversed. The subsidy for fertilizer was
eliminated, and its price rose very significantly. The marketing role of the
state was phased out. The system of minimum guaranteed prices for rice and
wheat was abolished, as were many state agricultural trading enterprises and
the seed agency responsible for producing and distributing seeds to farmers,
and subsidized credit also ended.

Simultaneously, applied tariffs for most agricultural imports were reduced
significantly to the present 20 percent. That, on top of the dismantling of
state support, left local farmers unable to compete with imports artificially
cheapened by high subsidies, especially in rice, tomato and poultry.

Rice output in the 1970s could meet all local needs, but by 2002, imports
made up 64 percent of domestic supply. Rice output in the Northern region
fell from an annual average of 56 000 tonnes (in 1978-80 to only 27 000
tonnes for the whole country in 1983. In 2003, the US exported 111 000 tonnes
of rice to Ghana. In the same year, the US government gave $1.3 billion in
subsidies for rice. A government study found that 57 percent of US rice farms
would not have covered their cost if they did not receive subsidies. In
2000-2003, the average costs of production and milling of US white rice was
$415 per tonne, but it was exported for just $274 per tonne, a price 34
percent below its costs.

Tomato was a thriving sector, especially in the Upper East region. As part of
a privatization programme, tomato-canning factories were sold off and closed,
while tariffs were reduced. This enabled the heavily subsidized EU tomato
industry to penetrate Ghana, and displace the livelihoods of tomato farmers
and industry employees.

Tomato paste imported in Ghana rose from 3 200 tonnes in 1994 to 24 077
tonnes in 2002. Local tomato production has stagnated since 1995, while
tomato-based products from Europe made inroads into African markets. In 2004,
EU aid for processed tomato products was 298 million euros, and there are
many more millions of euros in indirect aid (export refunds, operational
funds for producer organisations, etc).

Ghana’s poultry sector started to grow in the late 1950s, reaching its prime
in the late 1980s and declined steeply in the 1990s. The decline was due to
the withdrawal of government support and the reduction of tariffs. Poultry
imports rose by 144 percent between 1993 and 2003, and a significant share of
this were heavily subsidized poultry from Europe. In 2002, 15 European
countries exported 9 010 million tonnes of poultry meat for Euro 928 million,
at an average of Euro 809 per tonne. It is estimated that the total subsidy
on exported poultry (including export refunds, subsidies for cereals fed to
the poultry, etc) was Euro 254 per tonne.

Between 1996 and 2002, EU frozen chicken exports to West Africa rose
eight-fold, due mainly to import liberalization, practically wiping out the
half million chicken farmers in Ghana. In 1992, domestic farmers supplied 95
percent of Ghana’s market, but this share fell to 11 percent in 2001.

In 2003, Ghana’s parliament raised the poultry tariff from 20 to 40 percent.
This was still much below the bound rate (allowed by the World Trade
Organisation) of 99 percent. However, the IMF objected to this move and the
new approved tariff was not implemented. The IMF representative in Ghana told
Christian Aid that it pointed out to the government the raising of tariff was
not a good idea, and the government reflected on it and agreed. Many farmers
groups and NGOs in Ghana have protested to the government.
WTO completes the debacle

Some developments in the trade negotiating arena are also a source of
concern. The Doha negotiations at the World Trade Organisation (WTO) are
mandated to substantially reduce domestic support in developed countries. But
to date, that has not materialised.

Another source of concern is the new US Farm Bill. According to several
analyses, including those oif the US administration, the Bill will continue
the present system of subsidies, and will even expand support in some ways
for several commodities. For example, the Bill guarantees that 85 percent of
the domestic market for sugar will be met by local production.

The Bill also allows a farm family with an income of up to $1.5 million to
obtain subsidies, compared to the limit of $200 000 per farmer proposed by
the Bush administration. The Bill thus ‘locks in’ the US system and its
levels of subsidies for the next 5 years, and also constrains what the US
negotiators can offer in the WTO Doha negotiations.

A major loophole in the WTO agriculture agreement is that countries are
obliged to reduce their bound levels of domestic support that are deemed
‘trade distorting’ but there are no constraints on the amount of subsidies
deemed non-distorting or minimally distorting, which are placed in the
so-called Green Box.

Recent studies have shown, however, that many of the Green Box subsidies are
also trade-distorting. The Doha negotiations are unlikely to place new
effective disciplines on the Green Box. Therefore, the major subsidizing
countries can change the type of domestic subsidies they give, while reducing
the "trade-distorting subsidies" and continue to provide similar levels of
farm subsidies.

Meanwhile, the developing countries are being asked to reduce their
agricultural tariffs further. The Chair's proposal at the Doha talks is for a
maximum 36 percent tariff cut for developing countries, and 24 percent for
small vulnerable economies. This is sizable, and compares with the 24 percent
cut in the previous Uruguay Round.

Most developing countries are advocating that the instruments of SP and SSM
be set up as part of the WTO talks to promote food security and farmers’
livelihoods and rural development. SP would exempt important food products
from tariff cuts or at least allow for more lenient cuts. SSM would enable a
developing country to impose an additional duty on top of the bound rates in
situations of reduced import price or increased import volume, in order to
protect the local farmers. However, there is considerable opposition from
some exporting countries to having these instruments that can work in an
effective way.
Free trade agreements reduce tariffs even further

In the bilateral or regional free trade agreements involving developed and
developing countries, the developing countries are asked to reduce or
eliminate their tariffs by even more. For example, in the Economic
Partnership Agreements between ACP countries and the EU, the ACP (group of
African, Caribbean and Pacific less developed countries) are asked to
eliminate their tariffs on 80 percent of their tariff lines over different
time periods, among which are agricultural products.
Key policies and measures for food security

The economic and trade policies followed by many developing countries, often
at the advice of international financial institutions, or as part of
multilateral and bilateral trade agreements, have contributed to the stunting
of the agriculture sector in developing countries. In order to increase food
production in developing countries for food security, a number of policies
and measures need to be implemented.

1. Developing countries must be allowed to provide adequate support to
their agriculture sector and to have a realistic tariff policy to advance
their agriculture, especially as developed countries’ subsidies are
continuing at a high level. The developed countries should quickly reduce
their actual levels of subsidy.
2. The agriculture policy paradigm in developing countries must be allowed
to change. Countries should have the policy space to expand public
expenditure on agriculture. Governments in developing countries must be
allowed to provide and expand support to the agriculture sector.
3. Developing countries should place high priority on expanding local food
production. Accompanying measures and policies should thus be put in place.
The countries should be allowed to calibrate their agricultural tariffs in
such a way as to ensure that the local products can be competitive and the
farmers’ livelihoods and incomes are sustained, and national food security
assured.
4. The proposals of developing countries (led by the G33) on special
products and special safeguard mechanism at the WTO should be supported.
Effective instruments that can meet the aims should be established.
5. The policies of the World Bank, IMF and regional development banks
should be reviewed and revised as soon as possible, so that they do not
continue to be barriers to food security and agricultural development in
developing countries.
6. The actual levels (and not just the bound levels) of agricultural
domestic subsidies in developed countries should be effectively and
substantially reduced. There should also be new and effective disciplines on
the Green Box subsidies to ensure that this category does not remain an
‘escape clause’ that allows distorting subsidies detrimental to developing
countries.
7. There should be a review of many of the FTAs between developed and
developing countries, including the Economic Partnership Agreements between
the EU and ACP countries. In light of the food crisis and the changing
paradigm on food security, developing countries that have signed or are in
the process of negotiating FTAs should ensure that the FTAs provide enough
policy space to allow sufficiently high tariffs on agricultural imports to
safeguard the principles of food security, farmers' livelihoods and rural
development. Developed countries should also not make demands that adversely
affect food production in developing countries.

Martin Khor is Director of the Third World Network, and this article is a
revised and edited version of part of a paper on food crisis and climate
change presented at a round-table at the FAO Summit on Food Security in Rome
on 4 June 2008. For further details see Khor M. The impact of trade
liberalization on agriculture in developing countries: the experience of
Ghana. TWN, Penang, 2008.






  • [Livingontheland] Rising Prices Reinforce Need for Food Security Policies, Tradingpost, 07/15/2008

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