at the WTO and leaders of several governments have
launched what is said to be a ''last ditch effort''
to save the Doha Development Round of trade negotiations
from what is seen as imminent collapse. Will it collapse?
And does it matter if it does? Or in other words,
what is the likelihood of such a deal, and how much
would it benefit developing countries?
The brief answers are: low and
The finger-pointing for the failure so far has been
directed either at the US (in which domestic politics
suggests very little appetite for external trade negotiations)
or the newly significant large emerging economies
like China, Brazil and India (that are less willing
to accept what are seen as unequal terms) or the overall
impact of the Great Recession (which has made more
countries wary of trade openness that could undermine
domestic production and employment).
One aspect that is less talked about is the impact
of the WTO Agreement on Agriculture on agriculture
and food security in the developing world. The apathy
or even downright cynicism in such quarters towards
a new trade deal can be understood if we examine this.
Basically, many developing countries are now more
food-insecure than they ever were, and at least some
part of that can be related to recent trade patterns.
Global food prices have been very volatile over the
past four years. They rose rapidly from early 2007,
reached a peak in June 2008, then declined only to
increase again from early 2009. In December 2010 the
food price index crossed its previous peak. In
March 2011 food prices were on average around 37 per
cent higher than a year earlier, while cereal prices
were 60 per cent higher. Similar patterns are evident
in global fuel markets, which have been furthered
roiled by the unrest in the Middle East.
It is true that this rapid increase cannot be explained
entirely by real demand and supply. Speculative financial
activity in commodity futures markets continues to
play a role, as commodity investment seems like
an attractive option in a period of low interest rates,
and the moral hazard created by recent bailouts allows
investors to downplay the risks. Obviously, regulating
such activity is a necessary component in any international
strategy to stabilise the prices of these essential
But that is clearly not going to be enough. The possibility
of future financial regulation is small comfort to
countries that are currently buffeted by these huge
food price increases, which have already generated
massive unrest and even contributed to unseating governments
in different parts of the developing world. Countries
that rely on food imports are of course hugely affected,
but even economies that import relatively little food
have seen their domestic food prices shoot up in response
to global prices.
This relates more to food trade and production than
just finance. An unfortunate legacy of the WTO regime
is that many developing countries find that they are
now much more exposed and vulnerable to even short-term
price fluctuations that create domestic food insecurity.
This is contrary to the promise of the Uruguay Round
that developing countries would increase their incomes
through net agricultural exports, enabled by the reduction
or elimination of subsidies and restrictions on market
access in the developed countries. The reality turned
out to be quite different, as developed countries
used the small print in the Agreement on Agriculture
to continue with high subsidies and various form of
denial of market access. Meanwhile, developing countries
opened up their agricultural trade, and found that
their farmers had to compete with massively subsidised
competition from Northern agribusinesses. Trade openness
caused farmers to shifts from traditional food crops
that were often better suited to ecological conditions,
to cash crops that increasingly relied on purchased
inputs and were subject to market volatility.
As it happens, cultivators in the developing world
have found it difficult to benefit from cash crop
production even in periods of rising prices. Both
public provision of different inputs for cultivation
and government regulation of private input provision
were progressively reduced, so costs of seeds, fertilisers
and pesticides increased quite sharply. Financial
liberalisation made it more difficult for farmers
to access institutional credit. Insufficient public
investment in agricultural research and extension
was associated with cultivation practices that reduce
soil productivity and therefore yields.
So the facile ideas underpinning the Agreement on
Agriculture - that farmers could simply shift to cash
crop cultivation to increase their incomes and that
developing countries could simply choose to export
cash crops and import food whenever required without
implications for food security - have been a recipe
for disaster in many countries.
Now that global food prices are at record highs, it
is not surprising that more governments are sceptical
of the much-vaunted benefits of supposedly more open
trade, especially when it has increased the food insecurity
of their populations. They naturally want more safeguards
against predatory imports and more freedom to support
domestic food production. Yet the
current negotiations in the Doha Round contain
few such proposals.
Is it any wonder that so many developing countries
have ceased to believe in any possibility of real
gains and so are prepared to just let the Doha Round