Collectif Stratègies Alimentaires    Collectif Stratègies Alimentaires asbl

The food price crisis calls for a change in the governance of agriculture

by Alex Danau, 2 June 2008

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“For about two years now, world food prices have been rising substantially and as a result the poorest countries have been excluded from the market. In other countries the price hikes are rekindling inflation. These facts are proof enough that the absence of regulatory mechanisms increases market volatility and economic uncertainty.”

The FWA, the FJA, the UAW and the CSA wish to state their position regarding the present food price crisis. Their views are based on experience gathered in many joint projects and cooperation with different NGOs and representative farmers’ organisations from Africa, Latin America and other continents.

Due to strong pressures on the international market imported foodstuffs have become expensive and food more costly for the consumer. The extent of the impact of the added cost varies according to purchasing power and the proportion of income spent on food. Consequently we see serious shortages hitting million of poor families and a general erosion of purchasing power (due to inflation) affecting everyone and causing an economic slowdown.

Important organisations are reacting to this food crisis - organisations like the World Bank, the IMF, the World Trade Organisation, the FAO, the European Commission and more. They all want to issue instructions on how to tackle the situation. They appear to be calling for higher production and greater liberalisation.

In their diagnoses they all mention the same set of causes (although the order of importance may differ). They list growth of demand, particularly in developing countries, climate change, competition from biofuels, oil prices (raising transportation costs and driving up the prices of other fuels), speculation and low world stocks.

We note that these analyses practically always fail to mention deficiencies in the area of agricultural policy governance at international level and fail to assess the effects of the deregulation of agricultural markets imposed by the World Trade Organisation (WTO), the Bretton Woods institutions and others, as well as by the States who sit in these bodies.

In reality, for more than fifteen years now, the trend to “leave everything to market forces” has brought extremely low world prices and these, together with the dismantling of the main agricultural policy instruments, have wiped out farming some poor parts of the world and unleashed a huge rural exodus.

This is the situation in most of the developing countries, most of which have undergone “structural adjustment, but it is also relevant to the member states of the European Union.

The Common Agricultural Policy (CAP) is following the same course and giving up its market regulation instruments. In its 2003 reform the European Commission chose to abandon the main regulatory mechanisms (intervention, storage, quotas). With the Health Check, which will be adopted before the end of this year, the Commission is continuing its course without learning lessons from the past.

In parallel to this at the WTO negotiations the European Union is agreeing to another big decrease in border protection (customs duties, safeguard clause, fixed tariffs, tariff quotas, etc.) and permanently dismantling the market regulation instruments of its agricultural policy.

If the crisis is a serious one major exporters - even those supporting total liberalisation - may well restrict their exports to safeguard domestic cereal supply (by way of example, the 1973 US soy embargo hit the EU very hard and led to the introduction of support measures for oilseed and protein crop production).

The present price explosion and its consequences are a welcome alarm bell, reminding us that food is an elementary need, and that agriculture is its only source.

Agriculture is the sum total of many farms, most of which are family businesses, even in the rich countries. In many countries - China included - it provides incomes for over half the population. The agricultural sector is also directly responsible for the creation of large numbers of jobs, both in “upstream” and “downstream” industries. Nor should one disregard the importance for European agriculture of preserving large numbers of farms spread all over the Union (safeguarding the rural fabric, increasing economic and environmental efficiency).

It would be a delusion to believe that any single solution will be a universal panacea. A raft of measures are needed to curb current trends.

First and foremost, family farms must be given the support they need by ensuring producer prices are cost-effective. Several measures are necessary to achieve this objective:

- Rehabilitating and reintroducing measures to support producer prices.
- Completely reviewing the market access rules set out in the WTO Agreement on Agriculture. It would be particularly helpful to re-establish variable tariffs which have the added advantage of neutralising currency effects, whilst maintaining and improving safeguard clauses to make them more effective and easy to apply. This will enable states and regional groupings of states (the EU, ECOWAS, etc.) to regulate their markets.
- Reasserting the primacy of agricultural and food policies over trade policies. Agricultural policies ought to be able to steer and manage support for agriculture rather than being straight-jacketed by trade rules. That is the basis of the principle of food sovereignty.

It is important to realise that support for agriculture and benefits for consumers are not mutually exclusive. They can be combined. Producer price support should not be detrimental to consumers. It is not price support that is causing the present price explosion. Quite to the contrary, consumers have benefited a great deal from increased agricultural productivity. The disappearance or absence of support measures actually handicaps agricultural production, impoverishing and bankrupting millions of farmers.

It is therefore necessary to:

- Subsidise food for the poorest section of the population.

We must not forget that there are still many farmers who do not have strong farmers’ organisations or access to elementary factors of production. Their associations need to be supported so that they can organise proper consultation of the farming community, undertake collective bargaining with the public authorities and other market players, and of course improve conditions in the production sectors. Therefore priority should be given to the following:-

- Supporting producer organisations and considering them as social partners, involving them in permanent consultation and dialogue with the public authorities and the appropriate international institutions.
- Substantially improving farmers’ access to the inputs they lack (good quality seed, fertilisers, water, land, funding, agricultural services, etc.)

The goals of trade should be stability, predictability and the absolute certainty of having good, healthy food for all - for the benefit of farmers and consumers alike.

Therefore, with a view to improving regional cohesion and reinforcing the principle of food sovereignty, we urge:

- That the use of agricultural products for food purposes should take precedence over all other purposes, particularly energy production.
- That in the context of international trade, priority should be given to improving predictability through the negotiation of multi-annual quotas. Predictability could be substantially enhanced through an international multi-product agreement to foster cooperation on supply management for agricultural products through on the assessment of global demand and the constitution of sufficient intervention stocks.
- That speculation on agricultural markets should be curbed, e.g. through controls and high tax rates on speculative funds.

We hope that the will of heads of state, combined with the wishes of citizens and the full involvement of producer organisations, will deliver food security both in rural and urban areas.

FWA - Yves Somville tel. 081/60.00.60

FJA - Olivier Plunus tel. 081/60.00.60

UAW - Anne Petre tel. 081/60.00.60

CSA - Alex Danau tel. 02/412.06.60