DEPUTY DIRECTOR-GENERAL JEAN-MARIE PAUGAM
Good morning, ladies and gentlemen,
My key message is that the collective response of the international community to the current food crisis has proven reasonably effective so far: we have not been working in vain and that should encourage us — public and private entities — to continue to collaborate in confronting the challenges ahead.
It would be easy for me or anyone to paint a bleak portrait of the global food security situation. Conflicts, COVID, supply-chain disruptions and climate shocks have severely impacted trade in agricultural commodities. Forty-five million people in more than 50 countries face the threat of famine in 2023. Three Hundred and forty-five million people face acute food insecurity. Food inflation is still running high. Geopolitical tensions remain high, including particularly the conflict in Ukraine and its impact on the Black Sea region who play a systemic role in global grains’ trade.
Yet I want to take the good out of the bad and focus on what has been achieved so far in responding to the food crisis as well as how we need to respond to the challenges ahead.
What did we achieve over the last year?
In a very limited time, we have managed to put together coherent international responses to the crisis among governments, international organisations and the private sector. A crisis group was set up by the Secretary-General of the UN to coordinate the work of relevant UN agencies. The leaders of the FAO, World Bank, IMF, World Food Program and WTO have joined hands and committed to align their goals and intensify cooperation to deal with the crisis. National Governments have been also active in adopting measures such as the FARM initiative led by France and the EU, and the Global Alliance for Food security proposed by Germany to the G7. Mention should also be made of the Black Sea Grain Initiative concluded between Russia, Ukraine and Turkey under the auspices of the UNSG.
This chain of responses has also involved close dialogue and cooperation with the private sector: banks on trade finance, insurance companies, shippers, traders and intergovernmental organisations such as the IGC. I want to thank you for this very reactive and fluid dialogue.
Each agency has been doing its part, FAO and World Bank on the production, IMF on finances and, of course, the WTO on trade. WTO's efforts have focussed on three main elements:
— Keeping markets transparent: Our key role is to monitor and report on trade restricting and trade facilitating measures, and to provide accurate information to markets and governments. The measures that we report on are confirmed by the relevant governments, which guarantees the robustness of our findings. We also contribute to the AMIS system which has proved valuable to us all.
Finally, I am proud to mention that we joined hands with the International Grain Council to propose to our members and the wider trade community a “wheat dashboard” which provides almost real time, boat by boat, information on the wheat seaborne shipments. Thank you, Arnaud, for this impressive joint venture which was just launched last week.
This transparency effort is essential to prevent panic-mode decisions, support rationale policymaking and enhance international cooperation, as well as reduce opportunities for speculation. I would value your views on this and welcome any suggestions of what we could do better.
— Keeping markets open: In June last year, our members committed themselves to exercise restraint in the use of trade restrictive measures, in particular export restrictions.
You know that our rulebook authorises the use of such measure in times of crisis when risks of domestic critical food shortage arise, but if everyone does it at the same time then everybody gets worse off. Members also agreed to exempt purchases by the WFP for humanitarian purposes from the imposition of export restrictions
Consideration of the most vulnerable countries is our third endeavour. Members decided in the MC12 declaration on the response to food insecurity to establish a Working Group at the WTO to explore how to better respond to the needs of LDCs and NFIDCs in times of crises where they bear the brunt from increased prices of most commodities. Some preliminary conclusions from this work are expected by this Summer.
I think it is fair to report that the results of these combined efforts have been quite impressive. At least the market response has been positive. What did we see?
— International food prices moving downward. In May 2023, the FAO Food Price Index was 23% below the record peak in March 2022. Food prices have continued their gradual decline (after a slight uptick of 0.8% in April 2023)(1).
— Trade has continued to enable countries to diversify their sources of food. For example, Ethiopia, which used to rely on Ukraine and Russia for 45% of its wheat imports, increased purchases from other producers, including the US an Argentina.
— The number of restrictive measures imposed by WTO members after the outbreak of the Ukraine war stabilised after mid-2022.
- Overall, 92 export restrictions on food and feed were introduced by 29 WTO members and 6 observers since the outbreak of the war. As of 9 May 2023, 34 measures had been phased out, bringing the total number of measures currently to 58, from 27 members and 6 observers.
- Measures imposed by Members became less restrictive, and diversified away from the initial concentration on grains, sugar, and oilseeds.
- In parallel, 86 trade facilitating measures were put in place on food and feed products, with 64 still in place.
We also closely examined the market situation of fertilisers. Together with the FAO and World Bank, we prepared a report for the G20 last year. Fertilizer prices have also declined, while remaining at high levels: Fertilizer prices hit record highs in nominal terms in 2022 but have since declined by more than 40%.
Does this mean that we are off the hook with the crisis? Certainly not! By this I mean the following:
- Food inflation remains at record levels with the April 2023 food price index above the level recorded in July 2021 and more than 45% higher than in 2020. Moreover, while prices have decreased since their March 2022 peak, this trend has not always been transmitted to domestic markets. This lack of transmission is very concerning since it can have direct political consequences.
- Many countries remain highly dependent and potentially vulnerable in their food imports capacities.
- Fertiliser production is highly concentrated and therefore vulnerable to shocks.
So where do we need to go from there?
First, we need more of the same against the crisis: we need to continue striving for full transparency, maximum, and relentless international cooperation to maintain and improve food markets functions. The work that the WTO is doing together with the IGC on transparency is extremely important and needs to continue.
Second, we need to seriously tackle the root causes of disturbances in the food trading system so as to ensure its resilience It is imperative that we look at the way negotiations have been conducted to date focussing on the three pillars of the Agreement on Agriculture: domestic subsidies, export subsidies and market access.
Here as you know, we have been stuck for a long time with little progress made since 2000 when the negotiations were launched. We have been dealing with opposing visions of what would constitute adequate policy instruments to deal with issues such as Public Stockholdings for Food Security Purposes. There is absolutely no reason why this issue could not be solved through straightforward and fair negotiations. It is of utmost importance that our forthcoming Ministerial meeting in February 2024 deliver a step forward on agricultural trade-related reform. All our members now recognize this as an imperative and want concrete action to be taken.
Third, we need to open the book of the future and start to systematically look at the nexus between food security, climate change/sustainability, agricultural innovation and of course trade. At the very least, the dynamics which are already present here have the potential to reshuffle a lot of the current distribution of comparative advantages in agriculture. Let’s start this discussion without delay.
I look forward to continuing the good work that we are doing together with partner institutions and agencies. In that regard, let me thank most sincerely the IGC for its great collaboration with the WTO over the years. Thank you for your attention.