TWN Info Service on Sustainable Agriculture
28 April 2022
Third World Network

Conclude permanent solution on PSH at MC12, say participants
Published in SUNS #9564 dated 28 April 2022

Geneva, 27 Apr (D. Ravi Kanth) - Several participants taking part in a public seminar on food security organized by the World Trade Organization on 26 April drove home a strong message on the need to conclude the permanent solution for public stockholding (PSH) programs for food security at the upcoming WTO's 12th ministerial conference (MC12).

The participants highlighted the role of PSH programs in developing countries in addressing the current food crisis in these countries, especially the recent spike in food prices due to the ongoing Russia-Ukraine war, said a participant, Dr Sachin Kumar Sharma, an Associate Professor at the Centre for WTO Studies in New Delhi, India.

The seminar was apparently convened by the WTO to deflect from the heightened focus on the permanent solution for PSH programs to the broader global food security crisis against the backdrop of the Russia-Ukraine war.

WTO DG'S EMPHASIS ON TRADE

In her opening remarks at the seminar, the WTO Director-General Ms Ngozi Okonjo-Iweala emphasized that trade can play a central role in addressing rising food prices and worsening food insecurity.

However, the DG did not elaborate on how trade can bring down food prices a nd increase access to food in developing countries in the current situation, which are dependent on Russia and Ukraine for a variety of items like wheat, edible oils, barley, and fertilizers among others.

According to a statement posted on the WTO's website, Russia and Ukraine play a major role in the exports of wheat, sunflowers and barley among others.

Russia and Ukraine together account for more than one-quarter of all traded wheat, and around three-quarters of world exports of crude sunflower oil, said the DG.

In addition, Russia accounts for nearly one-tenth of fuel exports and, together with Belarus, one-fifth of the world supply of fertilizer.

The DG said that the effects of rising food prices and inadequate availability of these major products are being acutely felt by households in Africa and the Middle East.

Ms Okonjo-Iweala said "35 countries in Africa import food and 22 import fertilizer from Russia, Ukraine, or both countries."

According to the statement posted on the WTO's website, Ms Okonjo-Iweala underscored the central role that trade can play in addressing food insecurity, including improving availability and access to food.

Without referring to the permanent solution for PSH programs, the DG maintained that trade negotiators are very conscious of the need to improve food security as they prepare for the upcoming MC12, which is scheduled to take place in Geneva from 12 to 15 June.

Several other international organizations including the Food and Agriculture Organization of the United Nations (FAO) and the UN World Food Programme (WFP) made presentations during the seminar.

The FAO suggested that several factors such as low productivity and efficiency, climate change and economic slowdown appear to have contributed to the current food insecurity across countries.

The FAO said that between 720 and 811 million people faced chronic hunger in 2020.

It argued that despite the UN Sustainable Development Goal (SDG) on eliminating hunger, "around 660 million people may still face hunger in 2030, including tens of millions linked to possible lasting effects of the pandemic."

The FAO said this is not yet taking into account the impact of the war in Ukraine, which has already manifested in rising prices of wheat, sunflowers, barley, and fertilizers.

It emphasized that "beyond hunger, nearly one in three people in the world were affected by moderate or severe food insecurity in 2020."

The FAO offered several suggestions such as building more resilient agri-food systems, including tackling poverty and inequality.

INDONESIA SETS THE GROUND ON PSH

At the seminar, Indonesia's trade envoy Dandy S. Iswara, who was a main discussant, set the ground by suggesting that "the Covid-19 pandemic, exacerbated by the latest geopolitical situation, have forced us to embark from an in- room debate to an action-oriented decision-making process."

He said members need "to know the best policy tools available under the WTO framework to ensure that Members can cope with their food security challenges. And in case existing tools are inadequate, we should then work together to create them."

Ambassador Iswara argued that participants cannot ignore the detrimental impacts of the pandemic as well as other unprecedented conditions, which have created uncertainties in the market and price volatility.

Referring to the presentations made by the UN organizations, Ambassador Iswara highlighted "various trade policies that could be implemented to address food security challenges some preferred more than others."

However, in order to address the complex issue of food security, there is n o single policy tool that is better than the others.

In fact, a policy instrument that works in one country may not be as workable in another, Ambassador Iswara said.

He said that "the only common objective that all countries have when addressing the food security issue is to feed its people. To this end, ensuring food security for our people must address equally the issues of availability, accessibility, and affordability."

More importantly, he said, "the diverse ways in which countries address their food security challenges vary due to different circumstances, such as the population number, natural resources available, fiscal capacity, geographical situation, economic development, and poverty rate."

Justifiably, Ambassador Iswara said, "these considerations are taken into account by the policy-makers as they decide which policy instruments will be implemented to achieve their national food security."

Commenting on the observations made by the speakers on the various trade policy tools that could be implemented to achieve food security, not only domestic ally, but also globally, the Indonesian trade envoy said "in this regard, I would like to emphasize on the need for balance."

Moreover, such balance "can only be achieved, by not only maintaining an open and predictable market system, but also a fair and equitable environment that would allow the enhancement of domestic food production capacity," Ambassad or Iswara emphasized.

While open trade complemented by domestic production in the global food system are important elements for development, relying solely on trade would only create dependency and vulnerability, he suggested.

Ambassador Iswara said that "the current state for which we are right now could not exemplify better the fallacy of blind reliance on the global food supply chain," noting that open trade and fair competition in the global market are hard t o achieve when there are still gaps in the economic development level.

Even though the current WTO rules assume an international market that is perfect and global trade is balanced, Ambassador Iswara argued that "a re-framing o f the agricultural trade rules is needed so that we can rectify market-determined outcomes [that] only do not improve food security, as well as ensure that t he purpose of agricultural trade rules is to facilitate food security-enhancing measures."

He said that "developing members and LDCs could not and should not rely solely on open trade, where they would be left more vulnerable to market condition s."

Therefore, these countries should be able to maximize their capacities to produce more food and enhance their domestic food production before they compete in the global market, he argued.

In this regard, said Ambassador Iswara, "achieving a permanent solution on public stockholding for food security purposes and working towards an operable special safeguard mechanism at this upcoming Ministerial Conference would highlight that the WTO could respond correctly to the current challenges on food security. "

Also, "relying solely on open trade, where the main exporting countries have an edge in the global market by continuously providing high subsidies on agricultural products, is unfair and it would inevitably undermine the food security of other countries and put the people at risk," the Indonesian trade envoy argued.

His final message is that "as policymakers, we cannot allow the status quo where the rich become richer, while the poor become poorer and continuously defenceless."

He said that "we need to move toward a more equitable trading system, which allows economic development and fair competition for developing countries and LDCs."

According to the Indonesian trade envoy, who is the coordinator of the G-33 group of developing countries, "the regulatory challenges now hinge on reconciling food production to ensure adequate food supply, with maintaining equitable access to food and affordability of food. This is particularly important in light of emerging issues, such as market instability and price volatility."

Some possible policy instruments to address these issues are, but not limited to, public stockholding and the special safeguard mechanism, he said.

"These instruments will require the much-needed structural reform in the Agreement on Agriculture, while maintaining the noble objectives of the WTO to generate growth and development," Ambassador Iswara emphasized.

STRUCTURAL FLAWS IN AGREEMENT ON AGRICULTURE

In one of the key presentations at the seminar, Dr Sachin Kumar Sharma, who is an Associate Professor at the Centre for WTO Studies in New Delhi, offered a thorough analysis of the WTO's Agreement on Agriculture (AoA), saying that it is not inefficiency that is undermining the agricultural systems in developing countries but the structural flaws in the AoA.

He said that PSH is important for developing countries, due to "shrinking policy space for Nepal; per ton support for PSH rice in Indonesia under the AoA; inflation adjusted per ton support; and comparison of minimum support price for Indian rice."

According to Dr Sharma, the developing countries, including the least-developed countries "are characterized by pervasive farm distress owing to multiple challenges."

The challenges include "insufficient institutional support; small farm size ; price risks; and import surges."

Defending the PSH programs, he said that "the PSH programs have multiple objectives such as ensuring affordable access to food, stabilizing agricultural prices, and providing remunerative prices to enhance the purchasing power o f farmers."

Currently, the countries that are implementing PSH programs are Bangladesh, Bolivia, China, Ecuador, Egypt, India, Indonesia, Jordan, Kenya, Mali, Nepal, Pakistan, the Philippines, Saudi Arabia, Tanzania, Tunisia, Zambia, and Zimbabwe.

Items covered under the PSH programs include rice, maize, wheat, pulses, soyabean, barley, sugar and sorghum, Dr Sharma said.

In India's case, he said, the price support-backed PSH programs have successfully prevented "a Bengal famine-like situation after independence despite witnessing droughts in some years."

According to Dr Sharma, "during the food crisis in 2007-08, many countries witnessed massive public protests" but "PSH programs played an important role in ensuring price stability and food security in India, Indonesia, and China."

He quoted former US President George W Bush to bolster his arguments. President Bush had said in 2001 that "it's important for our nation to build - to grow foodstuffs, to feed our people. Can you imagine a country that was unable to grow enough food to feed the people? It would be a nation that would be subject to international pressure. It would be a nation at risk".

Explaining the issue of food security and the AoA, Dr Sharma said that the "external reference price [ERP] based on 1986-88 (export or import price) is the main source for creating problems for developing countries."

In his assessment, "updating the ERP or adjusting it for inflation would reflect the realistic levels of support being provided by the developing countries, including the LDCs."

At the seminar, a delegate from the US Department of Agriculture acknowledged the inflationary factor, suggesting that the US is studying this issue, said a participant who asked not to be quoted.

Meanwhile, a delegate from the European Union suggested that the issue of food security must be studied along with other issues, including trade-distorting domestic support, the participant said.

In a nutshell, the seminar's allegedly much-intended goal of diverting attention away from the permanent solution for PSH programs to the current global foo d security crisis did not come through as sought by the organizers.