April 11, 2014 12:18 am

World Trade Organisation takes on food security conundrum

©Reuters

Trade battle: Anand Sharma, India's trade minister, during tense talks at the WTO gathering in Bali in December

When the Indian government introduced a plan to buy vast amounts of grain from its farmers and sell it at a heavily subsidised rate to 70 per cent of the population, it hailed it as a victory for the country’s poor.

With this expansion of a national food security programme last summer, India set off another bitter battle over what the best way to support farmers and feed the impoverished and chronically hungry in a globalised world.

More

On this story

On this topic

IN The Business of Global Food Security

Where Delhi presented the move as a stand on behalf of the world’s poor, the US, EU and others saw the Indian project as a behemoth with the power to distort global commodity markets. And when ministers from the 159 members of the World Trade Organisation gathered in Bali in December, the resulting arguments almost led to the collapse of what in the end turned out to be the first deal in the WTO’s almost 20-year history.

That food security almost became the spoiler in Bali is telling.

At the centre of the Bali agenda was a benign pact to reduce red tape and other customs barriers to trade. Deemed uncontroversial, the accord was designed to rebuild confidence in the WTO and the multilateral trading system at a time when, fed up with the stalemate in the WTO, many big players were turning to “mega regional” trade agreements instead.

But the WTO has never been able to escape the issue of agriculture for long. Since the Doha Development Agenda was launched in 2001, the battle between rich and poor economies over how governments should support farmers and work together to feed the world’s hungry has been among the most fraught.

In the end, India and the US resolved their differences in Bali by effectively declaring a ceasefire on food security. Yet that only delayed the inevitable and set the stage for a bigger fight in the years to come.

Following what turned out to be the success in Bali, the WTO is now engaged in a monumental debate over what comes next. As Roberto Azevêdo, the Brazilian diplomat who took over as director-general of the WTO last September, has made clear, that means having to tackle prickly issues such as agriculture – and food security – head on.

The significant changes in the world during the 13-year life of the Doha round further complicate the prospect of dealing with such issues.

When it was launched in 2001, the big problem with global food supply was the way surpluses in the rich world were distorting markets. Subsidies in the US and Europe led to overproduction, “grain mountains” and “wine lakes” that when dumped on global markets led to depressed food prices that hurt farmers in the poor world.

The problem now, however, is almost the opposite, says Jonathan Hepburn, programme manager for agriculture at the Geneva-based International Centre for Trade and Sustainable Development.

Over the past decade, growing demand from China and other emerging economies has led to rising commodity prices around the world. Moreover, thanks to everything from droughts to the diversion of arable land to producing biofuels, producers are struggling to meet that demand.

The result has been rising food costs that in turn have led to government concerns about food security and what many fear is a new wave of protectionism and ill-conceived agricultural and trade policies that aggravate the situation.

“You have a very different set of global markets and a very different set of issues when it comes to food security from when the Doha round was launched,” says Mr Hepburn.

In a March report, the Cairns Group of agricultural producer nations, also offered a radically different view of the world of subsidies.

The report, presented to WTO members behind closed doors, found that total farm support in the EU and US had declined “dramatically” since the launch of Doha. On the other hand, the Cairns Group reported a substantial increase in what it called the “total trade distorting support” to farmers in both China and India.

Between 2001 and 2008 alone, the Cairns Group found that India’s “total trade distorting support” to farmers had risen from $8.2bn to $37.6bn, while in China over the same period it rose from just $320m to $13.9bn. In the EU, the figure fell from $36.1bn in 2001 to $10.3bn in 2011 while in the US for the same years it fell from $21.5bn to $14.4bn.

The question now is how the WTO’s members will respond. Can they absorb the new realities and move beyond the poor world versus rich world debate that has bogged things down for so long?

For now it is an open question. But the answer will certainly help determine whether the world’s hungry can count on global trade to help them secure their next meal.

Copyright The Financial Times Limited 2014. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

SHARE THIS QUOTE