Ladies and Gentlemen,
My main message to you today is simple; in order to cope with soaring food prices, supply must adjust to demand. For this to happen, trade will help. Easier, more open trade can strengthen the production capacity of developing countries, rendering them less vulnerable. I am aware that this point of view is not shared by all, and that some believe that more open trade can harm their domestic production capacity. But let us look at the numbers.
Looking at the list of the 22 countries that the FAO has identified as the most “vulnerable” to the food price crisis, we find that some of them are amongst the world's “least-trade integrated” economies in agriculture. Included amongst them are, for example, Zambia which imports only 4% of its total grain supply and Cambodia which imports only 5% of that supply. If these countries are amongst the most vulnerable to the food price crisis, it is not because of their integration into international agricultural markets. Rather, it is because they import nearly 100% of their oil, and with the rising price of oil, have found themselves impoverished.
Quite to the contrary, international trade can help ease food shortages by channelling food to where it is required. It can lead to greater efficiency by shifting production to countries with the greatest comparative advantage. Through greater and fairer competition, international trade can help lower prices. But all of this presupposes that the trade-distorting agriculture subsidies that have given an unfair advantage to rich world farmers, will be tackled. It would also necessitate tariff reduction. These two objectives have been agreed by WTO Members when they launched the Doha Development Round in 2001.
Climate change is also on the agenda of this meeting, and rightly so. It will have many impacts on agriculture, one of which is the potentially greater scarcity of water. In 2006, the UNDP's Human Development Report drew our attention to the water-saving potential of international trade. The “virtual trade in water” — as the UNDP called it — could lead to reduced water consumption in importing countries. It gave the powerful example of Egypt. If Egypt were to seek self-sufficiency in agriculture, it would have to import water!
Similarly, were Northern countries to aim for greater agricultural production in greenhouses, their carbon footprint would very soon come to complicate the already complex climate change negotiations.
The FAO tells that, contrary to some of the arguments we hear that the world has approached the “ceiling” of what is possible to produce, agricultural production is capable of rising. It is capable of keeping pace with rising demand for food. However, for “global” supply and demand equilibria to translate into equilibria at the “national level,” the many trade restrictions and unfair distortions that impede food production and travel must be tackled.
This is why the WTO Doha Round of trade negotiations can be part of the medium-to-long term response to the food price crisis. It would reduce the trade-distorting subsidies that have stymied the developing world's production capacity. It would also bring down tariffs — albeit while maintaining adequate safety nets — thereby increasing consumer access to food through lower prices. Efficiency gains would follow. I would be remiss if I were not to mention that the negotiations also provide a possibility for strengthening WTO rules on export restrictions.
Ladies and gentlemen, we know that the crisis we are facing today is multifaceted and that mitigating high food prices necessitates various policy initiatives at the domestic and international level; short-term, medium-term and long-term. Reducing unfair obstacles to trade can be part of the solution, but is far from sufficient. I am convinced that it is vital to reinforce the developing world's production capacity, which Jacques Diouf tells us is the number 1 challenge.
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