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Farming into the Future: Food, Trade and the Changing Global Economy

Written by Ricardo Melendez Ortiz, Chief Executive, International Center for Trade and Sustainable Development (ICSTD)

Farmers and rural communities have a key role in anticipating and responding to the stunning protean nature of the global economy, society and the environment in the 21st Century; indeed, in a similar way to what has always been their pivotal role in moments of fundamental transformation throughout our history - (recent acknowledgement of the key role of farmers can be found, for example, in the international organisations' report to the Mexican G-20 presidency on Sustainable Agricultural Productivity Growth and Bridging the Gap for Small Family Farms of 27 April 2012). In today's world, made of local and national economies tightly intertwined by trade, investment, infrastructure and technology, the ability of farmers and agriculture to generate food and the public goods required to sustain our routines, will depend to a great extent on the effectiveness of enabling regulatory frameworks of economic governance. The adequacy of such frameworks will determine whether the swings and adjustments from the 20th Century order take us unto a stable, sustainable and equitable future. Particularly important here would be to ensure that any transformation delivers benefits to the poorest and to vulnerable producers, the vast majority of whom live in countries today classed as 'developing' or 'least-developed'.

Every day many farmers tackle challenges brought about by swift upheavals in patterns of supply and demand, affecting choices about what to produce, which markets can be accessed and under what conditions, and influencing decisions about how best to manage multiple forms of risk. Furthermore, many already benefit from, or stand to benefit from, rising agricultural commodity prices resulting from wriggly demographics, increasing average incomes, swings in diets, low food stocks, high energy prices and more frequent, hasty or now recurrent alterations in climate; others, however, such as those who are net consumers, may face significant new challenges. Rapid transmission and contagion of trends, signals and all phenomena affecting farmers in a deeply integrated world economy make it imperative that policies and international regulatory frameworks on trade be carefully adapted to take into consideration the needs of the full range of stakeholders affected.

By definition, against a backdrop of national heterogeneous endowments and capabilities, food and agriculture demand can only be satisfied through global markets. Indeed, all prospective analyses assert that feeding the world's population entails a gradual and significant expansion of trans-border exchanges of agricultural products. Hence the imperative of a robust rules-based system that guarantees openness and supply. But the current agricultural trading system has proven insufficiently equipped to deal with those and other challenges already creeping-in during the past decade, and farm leaders increasingly find and complain that it is even less well prepared for those of the future.

Evident already as the world moves into a situation in which comparative advantages in agriculture significantly shift as a result of variations in yields and prices caused by climatic changes; one in which the most vulnerable farming communities are expected to carry a disproportionate burden.

International trade, combined with increased investment in agriculture production, can help address imbalances of supply and demand and make food available in world markets by offsetting climate-induced production decreases in certain regions. As trade becomes more important in countries' food security strategies, many have argued that an open, undistorted and enabling trading system is the best guarantee against severe disruption to demand-availability balances resulting from climate change. Others suggest that appropriate flexibilities in liberalization agreements combined with productivity enhancing measures are needed to deal with market failures and imperfect institutions in countries where livelihoods are intricately related to farming.

In agriculture, today's multilateral trading system does set limits for the levels of trade-distorting support that countries can offer, whilst providing certainty and predictability by setting a ceiling on agricultural import tariffs at agreed levels. It also establishes a mechanism through which countries can peacefully settle trade disputes, and a means through which rules and disciplines can be evolved through inclusive negotiations. However, it falls short, by itself, to more directly provide support to farmers or others to address new challenges in global trade associated with recent high and volatile prices - such as the ensuing export restrictions and bans that have affected farmers' access to markets, just as they have harmed consumers seeking secure and reliable access to food and other farm products. The multilateral trading system is also only just beginning to discuss -and not yet grapple with- the imperative of adapting its rulebook to address policies to tackle climate change.

Furthermore, while agreements on agriculture at the World Trade Organisation (WTO) have provided a framework under which a few countries have reduced their most trade-distorting agricultural domestic support and granted trading partners a degree of increased market access, farmers today continue to face competition from subsidised producers abroad, especially for certain products, and face tariff and non-tariff barriers to markets they may wish to access in other countries. This is despite the fact that, for some products such as cotton, the impacts on producers in the world's poorest countries has been widely documented and discussed; and despite the fact that some of these policy measures run directly counter to the sort of production and consumption incentives that governments will need to create if they are to tackle climate change effectively. The continued impasse in the WTO's Doha Development Agenda - where, over a decade ago, governments agreed to address at least some of these issues - demonstrates the continued need for spaces and platforms in the two-level game for dialogue between farmers, policy-makers and other constituencies over the relationship between agricultural trade policy and broader public policy goals.

Farm groups and others have emphasised that rising global demand for food will require substantial investment in agriculture towards productivity growth, especially in the developing world, that will be needed in order to provide an adequate response. Arguably, under the Mexican presidency of the G-20, this issue has at last been accorded the political importance it deserves. Current WTO rules largely allow countries to boost support to agriculture in order to catalyse further investment, so long as these payments do not distort trade - and countries others than traditional OECD agricultural subsidizers, China and India for instance, are increasingly taking advantage of this flexibility in their own domestic policies. Of course, experts continue to debate whether the various policies that have been introduced in these countries and elsewhere are always the most efficient and effective way to allocate scarce resources; however, farmers and others tend to agree that in order to overcome neglect of the sector in the recent past, developing country governments will now have to spend more on farming than they have done previously.

Sustainable management of land and water, along with the conservation and sustainable use of biodiversity, will be key if farmers are to be successful in achieving required productivity gains - and once again, trade policy will need to be part of the incentives and regulations package of policy measures that governments adopt to pursue these goals. While many developing countries are devoting a large and growing share of their budgets for agricultural support to environmental measures, the same issues have also taken centre stage in developed country debates over the future of agricultural trade policy - the lively discussions over the future of the Common Agricultural Policy in the EU being a case in point. As elsewhere, government policy-makers are having to walk a fine line between crafting policies that on the one hand are beneficial to custodians of the land now and in the future, and, on the other, to ensuring that policy interventions do not at the same time constitute an unfair competitive advantage over farmers in other parts of the world. A similar set of challenges faces legislators in Washington, D.C., this year as they try to write a new US Farm Bill.

From a sustainability perspective, the quest for effective solutions to public policy challenges, require pushing farm groups and policy-makers into creative thinking and new approaches to old problems. For example, in an ICTSD recent paper Professor Timothy Josling of Stanford University has suggested that, if governments are serious about overcoming food insecurity, the best way to do so without distorting trade would be to establish a global framework under which targeted consumer subsidies could be provided to vulnerable individuals and groups - an initiative that could work along the lines of the US food stamp programme. Josling has argued that, under such a scheme, the interests of farmers and consumers would coincide, "perhaps reproducing in other countries the coalition that has kept support for food stamps in the US alive for fifty years".

Farmers as well as other constituencies are likely to welcome the renewed political attention to agriculture at the global stage, both in the G-20 discussions on agricultural productivity and food security and in the run-up to the sustainable development Rio plus 20 gathering of heads of state in June 2012. Indeed, enduring public policy challenges related to agriculture- such as food security, increased competition for land use, climate change, water and the sustainable use of biodiversity- mean it is likely that the sector will remain high on political and leaders' agendas for some time to come. Farmers in both developed and developing countries are critical in ensuring that policies on international trade and investment are coherent with sustainable development goals.

 

 

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