Trade Negotiations Insights • Volume 7 • Number 6 • July 2008

The quest for answers: food and energy security

by Luisa Rodriguez

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The world is facing its worst food crisis since the 1970s: rapidly rising prices have triggered riots and threatened hunger in dozens of countries. The current situation is unprecedented on account of the number of commodities affected by price hikes and the simultaneous record costs for energy commodities.

The extent of the crisis recently prompted the UN secretary general, Ban Ki-moon, to issue a warning on the deepening global food crisis, which he said could have grave implications for international security, economic growth and social progress. At the recent United Nations Conference on Trade and Development held in Accra, Ghana, Ban Ki-Moon highlighted that the surge in prices of basic foodstuffs could cancel out progress made towards meeting the UN’s Millennium Development Goal of halving world poverty by 2015. It is important to look at the underlying causes of the current crisis and to explore the links between rising food prices, energy security and climate change. This can help understand the policy dilemmas that governments and developing countries are confronting and highlight possible multilateral responses.2

Converging views on the food security and energy debate

In recent weeks and months there has been much public discussion of the key issues. There seems to be some degree of consensus in the debate. First of all, rising global food and energy prices have had severe implications for international security, economic growth and social progress. Rising food and energy prices pose challenges to developing countries from different policy angles, such as hunger and access to food, social and economic development, energy use and climate change.
A complex combination of supply and demand factors is driving food prices up worldwide. There is agreement on which factors are affecting the supply side: decreased production capacity in developing countries, weather and natural disasters affecting crop yields. On the demand side, however, factors such as increased requirements for food commodities for biofuel production and greater demands from emerging countries (such as India and China) remain controversial (see the second half of this article).
On the supply side, some of the main contributing factors to the present situation include the current lack of agricultural production capacity in developing countries, inappropriate support policies and the decline of investment in the agricultural sector. These factors were linked tothe deregulation of agricultural markets due to policies recommended as part of Structural Adjustment Programmes and to phenomena such as trade dumping, import surges and import dependence, which have grown in frequency in developing countries over the last 10 years.

Decreasing stocks, financial speculation, rising prices of raw materials, distribution logistics and costs, trade distortions and protectionist market measures are also factors impacting the current crisis. In contrast with previous situations of high food prices, there is a stronger causal link between food prices and energy prices.
The impact of the crisis is different between countries and actors. In this sense, agricultural sectors in developed countries are equipped with advanced technologies, large financial resources and support systems to manage quick shifts in conditions. However, the agricultural sector in developing countries is characterised by more traditional farming mechanisms and a lack of institutional and financial means to deal effectively with the volatility of markets. As a result, there is a notable difference in productivityand scale.

Among developing countries, the crisis poses greater policy challenges for those such as Net Food Importing Developing Countries (NFIDCs) and particularly least developed countries (LDCs), who are dual importers of food and energy and have limited available resources. Within any one country, small scale farmers, poor farmers and rural populations were identified as being more vulnerable in the current context than urban consumers.
Depending on the impact and the challenges confronted, the policy solutions being implemented are different.
In Senegal, for example, there are many challenges confronting NFIDCs and LDCs. Policies being implemented, in the short term, aim to reduce the effect of oil and food price increases on consumers and vulnerable sectors, for instance through price controls, suspension of tariffs, import taxes and food subsidies. In the long term, the country has adopted the objective of developing production in certain sectors.
Thailand, on the other hand, is a middle-income exporting country. Policy priorities in the current context include increasing efficiency in production, enhancing market development, promoting the increase of the farming population and increasing income for small farmers. The major goal has been to achieve relative stability for producersand consumers.

Divergent views on the food security and energy debate

Many aspects of the current crisis raise considerably conflicting views. Some of the key arguments include: Use of agricultural commodities for biofuel production as a contributing factor to the current crisis. Many in Brazil present biofuel production as an opportunity for developing countries. Here, it is seen as having the environmental benefits of substituting fossil fuel, the possibility of using a Southern technology as leverage for development strategies and an effective policy for achieving higher standards of living in developing countries - particularly in rural areas. According to this perspective, the effect of biofuel policies on food security could be disregarded, given the fact that, in Brazil’s case, biofuel was being produced from other products.

According to other countries, however, biofuel production has had a direct impact on reducing availability and access to food. Many are concerned with respect to the uncompetitiveness of biofuel production and the increased trend for subsidising it in the North.

Increased demand from China and India as an important factor fuelling high prices

One widely held opinion is that the increased demand for food and energy from emerging economies has played a key role in the current situation. Others, however, point out that its importance has been over exaggerated. They claim that prices of fertilisers, transport costs and increased fuel costs are more significant in the current crisis and point out that US consumption of chicken and beef exceeds India’s by multiples of several hundred.3

Need to resort to a “Green Revolution” to increas productivity in the South

Some believe that the solution to the current crisis lies in increased productivity and that another “Green Revolution” is the way to achieve it.4 Others question this course of action claiming the results of past experiences in Asia and Africa fell short in terms of overcoming hunger and delivering equity.

Use of export bans and export restrictions

Some argue that export bans and restrictions exacerbate price increases and should be sidestepped in the current context. Others believe that it is legitimate to ensure internal availability of food supply before helping other countries.5

Trade liberalisation as a solution to the food crisis

It has been suggested that the Doha Round could contributeto solving the food crisis because its negotiating mandate includes the elimination of export subsidies, the reduction of trade distorting subsidies, the reduction of tariffs (which could increase international trade at the global level) and the implementation of Aid for Trade programmes(which should help developing countries to integrate in international markets).
Another view suggests that, in the current WTO negotiating scenario, the successful elimination of trade distorting practices is not definite. Moreover, existing WTO instruments designed to cope with situations such as the current crisis (i.e. the Marrakech decision in favour of NFIDCs and LDCs) have not yielded positive results. They claim that increased liberalisation in a context where countries lack means, policies and institutions to support agriculture, could only lead to growing import dependence and poverty in rural areas. This view advocates a scenario at the WTO that incorporates instruments such as safeguard measures and special products.

A handful of recommendations

The current crisis provides an opportunity to put food issues and security back on the global agenda, considering them in a broader development framework and linking them to variables such as the political angle of food trade, energy security and climate change. The current crisis could be characterised as a “wake up call,” which requires re-thinking past agricultural policies in developing countries and strengthening the role of the state in promoting productivity, long-term sustainability of agricultural production and protecting some of the most vulnerable producers and consumers.
Solving the crisis will require a dual approach: shortterm measures to provide assistance to countries through emergency aid, additional finance, inputs for productionincreased agricultural productivity, and longer-term solutions, which include increasing the capacity of developing countries to cope with market distortions, climate change and reduced productivity.
The following recommendations could also help to solve the crisis:

Supporting agricultural production and trade in the shortterm, through an increase of food assistance and safetynet programmes.
Sustaining efforts to build production capacity in the medium and long-term.
Mobilising and increasing investment in developing countries, particularly for agricultural raw materials (i.e. seeds and fertilisers) and infrastructure (transport and communication), to find solutions to post-harvest losses and reduce livestock diseases.
Increasing production and security for smallholders and guaranteeing remunerative, stable prices for farmers.
Empowering local communities to examine alternative policy solutions through multidisciplinary analysis.
Engaging in South-South cooperation. It might be interesting to look at Asian initiatives, particularly regarding regional food stocks that are not traded but kept for emergency purposes.
Reducing dependence on imports because of the link between food production, livelihood security and the characteristics of labour markets in the agricultural sector of developing countries.
Considering trade liberalisation as a part of the solution but not as the sole solution to the crisis.

The Food and Agriculture Organisation of the UN estimates that the funds required to handle the crisis are US $1.7 billion. In this context, the UN Task Force on the Global Food Crisis can play a key role in mobilising these funds and in coordinating a strategy to respond to problems at the global level.

1 Luisa Rodriguez is Programme Officer for Agriculture at the South Centre and has been working on trade and development since 2000.
2 This article was written following the South Centre Dialogue on Food Security and Energy Security, which was held in Geneva on June 17 2008. The seminar, organised with the help of the Permanent Mission of Indonesia in Geneva, brought together a wide range of actors with relevant expertise on food and energy matters. For further information on the dialogue see: www.southcentre.org
3 See: Indian outrage brings home Americans’ role in rising food prices, Indo Asian News Service, May 21 2008. www.ians.in
4 The term “Green Revolution” was first used in 1968 by former USAID Director William Gaud, who noted the spread of the new agricultural technologies “These and other developments in the field of agriculture contain the makings of a new revolution. It is not a violent Red Revolution like that of the Soviets, nor is it a White Revolution like that of the Shah of Iran. I call it the Green Revolution.”
5 See: India’s export ban on food grains : A measure to ensure availability of food for its poorest citizens, Adil Ali, The Oakland Institute. www.oaklandinstitute.org/?q=node/view/482