Magazine article Economic Review

Food Security & Trade Liberalization

Magazine article Economic Review

Food Security & Trade Liberalization

Article excerpt

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. …

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