[ International agriculture ]
After the crisis
The food-price crisis, which led to riots in 36 countries this year, took many by complete surprise. Before, basic food prices had fallen steadily for nearly four decades. That trend left its mark on food policies. In recent months, various new approaches have been taken and pledges made. They offer an opportunity for change, but there are also risks.
[ By Rudolf Buntzel ]
UN coordination
The guidelines for all government activities in response to food-price inflation are spelled out in the Common Framework of Action (CFA), which was drafted by UN Secretary-General Ban Ki-moon’s (see p.409) High Level Task Force on the Global Food Crisis (HTLF). Identifying 10 categories of action, it presents a range of possible measures from which nation states can pick the mix that suits them best. After the G8 voted in favour of the CFA in July and pledged more than $10 billion in total for addressing the crisis, this 10-point plan was hailed as the “New Deal for a Global Food Policy” (see box on page 410). The 10 points largely reflect the policy of Germany’s Federal Government.
The HLTF uses UN missions and World Bank offices to coordinate efforts in individual countries. The CFA has identified 27 countries in need of support. As the HLTF is a UN institution, “emerging” donors such as China, Saudi Arabia, India and Brazil are involved along with the established donor nations. That is a great advantage. The HLTF does not just make recommendations; it also intends to observe implementation and monitor impacts. However, it has neither the funding nor an explicit mandate for doing so.
In April, shortly after food riots in Haiti, the World Bank started the first major initiative under the title “Global Food Response Programme” (GFRP). The Bank pledged to mobilise $1.4 billion over the next three years. Its programme has four main components:
– support for grain stock management to stabilise markets,
– action to ensure food transfer and access,
– measures to enhance domestic food production, primarily through the distribution of seed and fertiliser, and
– ongoing evaluation.
In May, the FAO announced its “Initiative for Soaring Food Prices”, for which it aims to collect $1.7 billion from donors. Confining its activities to distributing high-quality seed and fertiliser and to advising governments on how to respond to the price rises, the FAO identified 79 countries as possible recipients.
Range of new approaches
In June, the FAO hosted the World Food Summit. Participating governments demanded that rural development be given greater priority. The final declaration stressed
– the importance of small-scale producers,
– a people-centred policy framework,
– the relevance of biodiversity,
– the role of agricultural research and
– the urgency of further liberalisation of international trade in agriculture.
On top of all this, the summit underlined the need to review policies on biofuels.
At the summit, Ban Ki-moon promised that the issue would be addressed at the highest level. His predecessor, Kofi Annan announced a new drive coordinated by the “Alliance for a Green Revolution in Africa”, an initiative supported by private-sector foundations based in the USA. The members of the New Partnership for Africa’s Development (NEPAD) restated their decision to earmark at least 10 % of their national budgets to rural development.
It was equally relevant, of course, that individual donor countries made sweeping bilateral promises. Britain, for example, pledged around €1 billion in agricultural aid. The EU promised €500 million for emergency relief and € 3.4 billion for rural development over the next six years.
In the meantime, Germany’s Development Ministry (BMZ) has reallocated funds in order to make available the € 600 million which Germany's Chancellor Angela Merkel promised for her “Global Food Security through Sustainable Development and Agriculture” programme. This money is welcome, though not new. Apart from providing immediate relief, these funds will mainly serve to scale up rural development programmes already underway in 12 selected partner countries.
The International Monetary Fund (IMF) also responded to the food crisis, using the instruments at its disposal to shore up the financial situation of countries in crisis. Indeed, the national economies hardest hit by food-price inflation are typically also marked by high indebtedness as well as dependence on grain imports. This trend is evident in an internal IMF paper. It shows that the foreign-exchange accounts of 18 Sub-Saharan African countries are in a desperate state due to high world-market prices for oil and food.
Early in summer, the IMF granted additional loans at low interest rates to five of the worst affected countries. Moreover, the Fund reformed its Exogenous Shock Facility, taking into account the food-price crisis. In this context, conditionalities were relaxed, though certainly not eliminated. Interest rates are still at 0.5%, with repayment periods spanning five to ten years.
The European Commission decided to allocate € 1 billion to addressing the food crisis. This sum was originally earmarked to subsidise European farmers, however the money was not disbursed due to high world-market prices. These funds will serve to provide food aid as well as seed and fertiliser. They will be shifted from the agricultural to the development budget through a special regulation called the “Food Crisis Response Facility”, the precise details of which are still under discussion.
As far as short- and medium-term programmes are concerned, the initiatives of bilateral donors and international organisations are aligned quite well. On long term rural development, however, strategies diverge. Even within the Global Donor Platform for Rural Development, a coordinating platform with a constituency of 32 state donors, there is no consensus on the matter. Conceptual disagreements concern
– the role of biotechnology in the fight against hunger,
– the significance of subsistence farming,
– the prioritisation of public-private partnerships and market-driven value-added chains,
– acknowledgement of farmers’ traditional knowledge,
– appreciation of intellectual property rights and
– whether to gear agriculture to domestic markets or the world market.
No Post-Washington Consensus
The World Bank still calls the tune. Given the strong presence of the World Bank, IMF and WTO in the HLTF, any genuine change of policy seems unlikely. Despite all the new concepts, rural policy is still fundamentally shaped by the Washington Consensus and the long-term conditionalities that go along with it. Liberalisation and deregulation are often the ultimate goal. “Food security” in the sense of ensuring that a country’s basic food needs are met from its own production is still widely rejected. The macroeconomic ideology of the IMF similarly remains dominant. There is still no operational Post-Washington Consensus.
Moreover, despite all claims to the contrary, not all new programmes are geared to the needs and wishes of recipient countries. To the contrary, relief programmes have their own operational logic, which is largely defined by logistics. It seems doubtful that the HLTF’s Common Framework will prevail, given that it lacks funding and vital structures.
On top of all this, the international trend towards sector-wide approaches and budget support in the name of aid effectiveness has also led to conditionalities that undermine food sovereignty. Unfortunately, concessionary moves by the IMF and World Bank to relax conditionalities in crisis-related programmes have hardly made a difference. The ideology of structural adjustment, PRSP processes and the implicit assumption that liberalisation is the only road to “good governance” endure.
The main reason for the World Bank being so powerful, however, is that the FAO is in deep crisis. It is in the throes of a reform process geared to turning it into an advisory institution. Accordingly, the organisation will implement fewer projects in future. In this setting, it would be wrong to make more money available to the FAO’s recent initiative than to those of other multilateral bodies. Doing so would distract the FAO from its advisory role, with undesired consequences for the reform process.
Points of criticism
Unfortunately, common demands to integrate small farmers into markets do not reflect the debate on subsistence and market production. The blueprint of “greater market integration plus hybrid seed and fertiliser” is far too crude. Creating attractive domestic markets that allow for appropriate small-farmer participation is a complex and daunting task. It cannot be done in an ad-hoc manner.
Experts generally agree that high world-market prices should serve as production incentives for farmers in developing countries. However, market barriers as well as policies geared to consumer interests all too often still prevent that from happening.
Many of the new proposals focus on boosting food production by distributing seed and fertiliser. The snag is that this approach fails to meet the needs of the local communities. Farming for self-sufficiency follows other rules than does food production in commercial agriculture. It would make more sense to set up advice facilities for subsistence farmers. But that approach would take time without offering any quick fixes.
Moreover, fertiliser markets worldwide are stretched to the extent that any increase in demand will push prices even higher. A large share of the money spent on supposedly social grounds will thus end up in the pockets of the small group of multinational corporations that dominate the international fertiliser market and seed business.
Pledges made for agricultural research are also worrisome if the money goes in to genetically modifying crops. Such technology for tropical agriculture is what Chancellor Angela Merkel explicitly identified as a priority before departing to the G8 summit in Japan. However, there is a host of up-front requirements.
For example, systems need to be in place to ensure biosecurity, proper risk assessment, licensing and patent protection. So far, moreover, the results of plant-genetic engineering have been disappointing in terms of fighting hunger. There are plenty of simpler, cheaper and faster ways to do meaningful agricultural research.
An interesting proposal is that of creating “virtual reserves” in the form of monetary funds used to intervene in excessive speculation with food commodities. It is claimed that the mere threat of mobilising such funds will be enough to quell speculation and thus smooth out wild price swings (see interview with Joachim von Braun on page 413).
Many experts argue, however, that it would be better to focus on local solutions. Steps to improve soil fertility, for example, would make sense. That is also true of promoting the supply of seed – including regional land races – through local distribution systems. Establishing small community-controlled grain and seed banks at village levels would also be quite meaningful.
Challenged credibility
In June, only shortly after the World Food Summit stressed the relevance of trade, the rich nations scuppered any chance of a WTO development round. Contradictions will thus continue to glare between the crisis support and agricultural trade policies of the European Union and the United States. Neither the EU nor the US were prepared to meet developing countries’ demand for a special safeguard clause to protect food security.
Making matters worse, the US Congress passed a new farm bill while the WTO talks were still going on. In spite of high world-market prices, US farmers will receive $ 300 billion dollars in subsidies over the next five years – mainly for rice, cotton, wheat, maize and soya. This decision was an affront to developing countries. Nor has global food-price inflation left any mark on present reform plans for the EU’s Common Agricultural Policy.
Accordingly, the credibility of the industrialised countries is seriously challenged. Except on certain conditions, they are plainly neither willing to abolish destructive export subsidies nor to dismantle trade-distorting farm subsidies. While they clamour for the successful conclusion of a WTO trade, the governments of rich nations are not prepared to make concessions until 2013 at the earliest.
Moreover, none of the initiatives discussed above addresses the fundamental question of food security – as if skyrocketing prices had not resulted from political action. The OECD countries have taken no account of developing countries’ interests in either their trade, agricultural or biofuel policies. What is more, neither the EU nor the US accept responsibility for the massive damage their export subsidies inflict on other countries.
Rich-nation governments find it hard to accept that other countries are prioritising their own needs in a similar way they do themselves. It is ironic, to say the least, that the USA and EU should expect the developing world’s rice exporters to show concern for others. The G8 and the international organisations were up in arms, for example, when Thailand, India, China, Kyrgyzstan and Egypt imposed export restrictions in the wake of the food-price crisis. Yet that is a logical response to the critical state of the world’s agricultural markets. After all, a country that meets its own basic needs is less exposed to the risk of escalating import prices.
Governments of OECD countries will lack credibility as long as the majority of them insist that their self-serving agricultural laws are not negotiable. These laws, after all, were enacted to safeguard food security at the national level.
A welcome result of the crisis is a greater awareness of rural issues. The potential limits of agricultural production have become clear, and so has the threat to global food supply. Strategies to support rural development are once again high on the international development agenda. Agriculture has gained a higher status in the budgets of donor organisations and developing-country governments.
In this sense, the crisis presents an opportunity to revise policy. Current programmes and initiatives offer interesting new approaches. Among them is the idea of virtual reserves, the proposal to reallocate former farm-subsidy funds to help manage global food supply and a clear focus on support for small-scale farmers.
Nonetheless, there is a risk of wrong signals being sent out by all the sudden action and vast sums of money that have become available. It needs to be remembered that programmes do not always help; they can actually do harm. Care must be taken to ensure that food aid does not distort local markets. Nor must it be allowed to create dependence on aid. In particular, donors must avoid monetarisation of relief supplies on local markets. If these matters are not handled well, standards of aid effectiveness and efficiency that have already been achieved will be eroded again.
The “New Deal for a Global Food Policy”
At the end of April, the Executive Council of the United Nations decided to create a High-Level Task Force for the Global Food Crisis. The HLTF is headed by UN Secretary-General Ban Ki-moon and FAO Director General Jacques Diouf. It includes representatives of international organisations and UN agencies such as UNCTAD, WHO and UNEP as well as non-UN agencies such as the World Bank and the International Monetary Fund.The HLTF’s task is to make proposals on how to resolve the pressing food-price crisis and coordinate the implementation of aid programmes. Early this summer, the HLTF presented the 10-point action plan to which the G8 subsequently pledged support. It has been hailed as the “New Deal for a Global Food Policy” and includes the following core issues:
1. emergency measures to meet immediate food needs of people hit by crisis (primarily through increased funding of the World Food Programme);
2. social protection programmes for groups particularly at risk (through school-meal programmes, for instance, or food ration cards);
3. supplying farmers with seed and fertiliser for the next planting season;
4. structural support for agriculture (agricultural advice and research, post-harvest protection, irrigation, rural infrastructure, productive investment);
5. improving the investment climate to encourage the private-sector and boost retail and wholesale companies value-added chains;
6. developing insurance systems for farmers;
7. reviewing the biofuel policies in the G8 countries;
8. abandonment of export restriction policies;
9. successful conclusion of the WTO Doha Development Round; and
10. ensuring international transparency and coordination of national grain-reserve policies.
Rudolf Buntzel
is a policy advisor with Germany’s Protestant Church Development Service (EED).
»» Rudolf.Buntzel@eed.de
More about
»» Read more about Agriculture, rural development
»» Read more about Economic development
D+C, 2008/11, Focus, Page 408-413
