Struggles for 'food security'

International trade in food is quite small compared to local production. Rice trade, for example, is only about 5 per cent of the global production of 400 million tonnes. Yet trade affects prices and domestic markets. When Indonesia and China each import 2 million tonnes of rice, then that has an impact.

What were the WTO disagreements? The wealthy countries foresaw a move on tariffs and export subsidies. The AOA was concluded in 1994, and between 1992 and 1999 the Europeans moved E1.3 billion out of export subsidies, but promptly added E2.1 billion to “green boxed” domestic subsidies. They moved ahead of the regulatory frontier.

The WTO’s “green box” on agricultural subsidies refers to subsidies that are paid for by the government and are “minimally trade distorting”. President Bush’s Farm Bill of 2002, for example, added US$7.5 billion a year to agricultural subsidies; all allowed by WTO rules. Similarly, Australian Government diesel fuel rebates, sugar and milk restructuring schemes, land care, salination and drought relief schemes are all allowed by WTO rules. But they certainly assist agribusiness, and reduce its operating costs. Developing countries usually cannot afford such schemes and find tariffs a more convenient form of protection.

The “Cairns Group”, set up in the late 1980s, allowed Australia to align itself with developing countries. All Cairns Group members wanted the US and EU domestic subsidies reduced or removed. Australian governments argued that farmers deserved higher prices and that US and European subsidies keep food prices artificially low.

But Cairns Group members such as Indonesia and the Philippines saw things differently on tariffs, and on special treatment for developing countries. They split from Australia in the final stages of the WTO’s Doha Round.

Volatility in food prices is damaging. Both low and high prices can hurt, and agricultural liberalisation has only worsened many countries’ exposure.

Differences over agricultural liberalisation are reflected in differences over food security and foreign aid. In 2000, for example Australia and the World Bank refused Timor Leste access to aid moneys to rebuild rice fields and grain silos. This was not “export oriented”. Undeterred, the Timorese got help in rice production from the FAO and the Japanese.

The UNDP tells us that Timor Leste reduced its dependence on imported rice from 2/3 to 1/3 of local requirements. Then came the political crisis of 2006, followed by the food crisis of 2008.

A new round of World Bank “food security” loans, linked to liberalisation, has already been announced. But past World Bank loans, the WTO debates and the current crisis are likely to harden developing country views on western hypocrisy and generate a variety of schemes to stabilise and protect domestic food production.