Playing politics with food prices

15 Feb, 2012 01:00 AM

The global food system and the policies that govern it are in disarray, a World Food Prize Laureate said in Fremantle last week, guaranteeing that food price volatility will continue for the foreseeable future.

Economist Per Pinstrup-Andersen believes that only when countries are bound to act in the global interest, rather than out of short-term political expediency, can the prospect of even greater see-sawing in food prices be averted.

But with the only mechanism to govern world trade, the World Trade Organisation (WTO), proving toothless in the face of recent intransigence, and food security fears driving policy decisions around the world, Prof. Pinstrup-Anderson thinks price fluctuations are set to get worse.

The former head of the International Food Policy Research Institute and current H. E. Babcock Professor of Food, Nutrition and Public Policy at Cornell University addressed the annual conference of the Australian Agricultural and Resource Economics Society last week.

Once, Prof. Pinstrup-Andersen told Rural Press, trade distortions could be blamed on American and European subsidies. But in recent years it has largely been the "misbehaviour" of countries like India, China and Russia that have caused big food price fluctutations.

Extreme weather events have been a trigger for food price volatility, but climatic problems have been greatly amplified by political responses, like the export bans on rice imposed by India and on wheat by Russia.

Under WTO rules, countries may halt exports in acute emergencies, but the interruptions to free trade of the past few years have not arisen from crisis situations, Prof. Pinstrup-Anderson said.

"You can't have it both ways, so that when things are good you participate in free trade but the minute when it's in your interest not to, you stop at the expense of everyone else. That's not only unethical, but it's against the WTO agreement."

The answer?

"I don't know," said Prof. Pinstrup-Andersen frankly. "It's hard to tell how much the WTO can do. You don't really have any penalties that you can put in place against countries that misbehave. What are you going to do to India if it puts an export ban on rice?"

"It's not working very well. It raises some questions as to whether these trade agreements are worth the effort we put into them."

While price fluctations look to become a long-term phenomenon, Prof. Pinstrup-Andersen doesn't believe the baseline price of food needs to rise.

"We know how to produce more food, which is possible by reducing the yield gap in developing countries. In these countries, farmers are often in a straitjacket. They can't get access to credit, market access, or fertiliser."

"We have a tendency to think that we just need to strengthen our extension services, or give these farmers better technology. But we first need to remove the external problems, like market access or infrastructure, and then farmers can respond by changing their processes."

Prof. Pinstrup-Andersen also believes that the environmental costs of producing food and fibre should be factored into the global food system.

"One of the problems poorly understood by policy makers is that if we continue to do damage to the productivity of our natural resources, eventually the cost of production is going to go up," he said.

"If we deal with that now, in the short term production costs will go up but in the longer term we will all be better off."

"But it's what economists call the prisoners' dilemma: as long as we can't agree on doing it at the same time, it's probably not going to get done."

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15/02/2012 2:38:41 PM

If India puts a ban on rice exports when their production system fails (drought?), surely they have the right to look to their own interests first to prevent food riots in a very shaky democracy, the same probably goes for the Russians. Are they "Misbehaving" or just averting domestic chaos? This bloke is out of touch.
16/02/2012 11:27:32 AM

He is a university academic therefore by definition he is out of touch. Also he is described as an economist, but he doesn't seem to have heard of Adam Smith. It is not in the global interest to have places like India or Russia collapsing into political chaos due to food shortages.


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