24th March 2011
Bridges Weekly | Food prices: Leaked UN Report Urges G-20 Action on Farm Trade
A confidential draft report from leading international agencies has urged G-20 governments “immediately to strengthen” global rules on agricultural import and export restrictions as well as subsidies that distort production, discourage supply or constrain international trade, ahead of a meeting of senior officials from the G-20 group of major economies in Paris this week.
The draft, which has been prepared by seven international organisations under the leadership of the Organisation for Economic Co-operation and Development and the UN Food and Agriculture Organisation, aims to lay out “a blueprint for a systematic and internationally coordinated response” to food price volatility, in response to an explicit request from G-20 leaders at their November 2010 meeting in Seoul.
An earlier version of the report has been posted online, which sources have confirmed is broadly similar to the more recent one under consideration in Paris this week, although neither has been officially released.
Agriculture ministry officials will discuss the report’s recommendations, ahead of a summit of G-20 farm ministers scheduled for 22-23 June. French President Nicolas Sarkozy has made action on food price volatility a centrepiece of the group’s agenda during 2011, during which France will hold the group’s rotating chair.
Causes and consequences
Arguing that it is “important to distinguish between policy options designed to prevent or reduce price volatility and those designed to mitigate its consequences”, the report provides a set of recommendations in both areas. It lays out four types of policy options to reduce the causes of price volatility, looking at market information and transparency, international food stocks, futures markets and domestic and trade policies. It also divides options for coping with price volatility into short and long term action.
The agencies that authored the report recommend reducing price volatility by improving the transparency of futures markets, improving information sharing between governments and harmonising trade policies. The report calls for the establishment of emergency food reserves, early warning systems and safety nets as a means to mitigate the negative impacts of erratic prices. Finally, the authors place particular emphasis on the needs of the most vulnerable poor farmers and advise increasing investment in infrastructure, technology, and extension services.
Observing that 16 percent of humanity remains chronically undernourished, even when prices are stable, the report deviates from recent preoccupation over high prices to insist that “all policy interventions should have as their ultimate aim, the elimination of all food insecurity, whatever its cause.”
Export restrictions: disciplines needed
In a bold move, the report recommends that export restrictions should only be allowed when other measures have been exhausted. Currently, WTO rules allow countries considerable latitude to impose such measures, which have widely been seen as exacerbating food shortages during the 2007-08 price spikes, and again more recently in 2010.
Governments should develop an operational definition of a critical food shortage, the agencies claim, and should use this to establish whether export restrictions could be justified. They also urge G-20 governments to widen, strengthen and enforce the consultation and notification processes that are currently in place at the WTO, and advocate establishing a “fast track” consultation process under which members could meet and discuss whether a restrictive trade measure “can be avoided and how.”
The agencies also argue that G-20 governments must “demonstrate leadership” in the WTO’s long-running Doha Round of trade talks. In line with the agreed mandate for the talks, they call on countries to substantially improve market access, while maintaining appropriate safeguards for developing countries; substantially reduce trade-distorting domestic support, especially that provided by developed countries; and eliminate export subsidies.
Finally, the agencies recommend that the G-20 calls “on all nations” to allow purchases of humanitarian food to be exempted from export restrictions and extraordinary taxes. The move would strengthen commitments on food security that were made in 2009 at the July G8 summit in L’Aquila and at the November World Summit on Food Security in Rome, the authors say.
Biofuels and food
Leading economists have been urging the revision of biofuel policies in major producers, such as the US, where blending mandates link fuel prices to those of crops also used for food. The interagency report echoes this emerging consensus, calls for more research and recommends that governments adjust biofuel policies “when markets are under pressure and food supplies are endangered.”
Considering the confidential nature of the report, comment has been muted. Some officials at agencies involved complained about the lack of internal transparency in its preparation. Deliberations were so hushed that some key experts on food security and price volatility at the UN Food and Agriculture Organization were unaware of the report or its preparation. Others defended the secrecy on the grounds of the short time allowed for its preparation.
Food security has been high on the international agenda since the price spikes of 2007-8. Renewed pressure on prices has reinvigorated the French focus on price volatility at the G-20. Although the group’s specialisation has traditionally been largely financial, it has made non-binding commitments on trade, such as a 2009 declaration to limit protectionism. The group also laid out its own development agenda at a meeting in Seoul last year.
Other international processes on food price volatility are also underway, such as at the Committee on World Food Security (CFS) in Rome. The CFS has mandated that a panel of experts provide independent advice to help it reach a political consensus. That report will similarly be looking at the causes and consequences of price volatility and providing recommendations. This process will be following a previous consensus on tackling food security across twenty two international organizations, the Comprehensive Framework for Action.
Pressed for an answer on what will become of the report and its recommendations, an official said “now it’s in the hands of G-20 members.”
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