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New policies to address food crisis needed

Food prices have been increasing sharply, and are impacting the most vulnerable - the poor are particularly affected, as their diets rely on the very staples that are becoming too costly. The crisis is being felt not only by the poor, but is also eroding the gains of the working and middle classes.

The international financial institutions are promoting further trade liberalization and technological fixes such as the Green Revolution to boost agricultural production. However, it is essential to understand the underpinnings of this food crisis before rushing to adopt policy solutions. Over the last few decades, agricultural liberalization, dismantling of state marketing boards, and specialization of developing countries in exportable cash crops, encouraged by international financial institutions, have driven the poorest countries into a downward spiral.

Please find below two comments from the Oakland Institute on the food crisis and appropriate policies to address it.

The Oakland Institute has also produced a Policy Brief which examines the impact and causes of the soaring food prices and explores the viability of solutions recommended by the World Bank, WTO and the IMF to deal with growing hunger. It then makes recommendations on how to stave off the starvation. To download a copy of the policy brief, visit www.oaklandinstitute.org

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Item 1

The Oakland Institute Reporter, 14 April 2008
Food Price Crisis: A Wake Up Call for New Policies to Eradicate Hunger

In recent weeks, several UN agencies have issued warnings against impending food riots because of the acute hike in prices of rice, corn, wheat, and other staples. Morocco, Guinea, Egypt, Mexico, Haiti, Yemen, Mauritania, Senegal, Indonesia, and Uzbekistan have already been rocked by mass protests. The World Food Program (WFP), which feeds 73 million people in almost 80 countries, has called upon donor governments to close the $500 million funding gap by May 1, 2008 or it may not be able to make its food aid commitments. Worst affected by resulting hunger are the poor, surviving on less then $2 a day, in developing countries.

World food prices rose by 39 percent between February 2007 - 2008. The real price of rice rose to a 19-year high in March - an increase of 50 per cent in two weeks alone - while the real price of wheat has hit a 28-year high, triggering an international crisis. Various causes for this crisis are being cited in policy circles, including increased demand from China, India and other emerging economies, rising fuel and fertilizer costs, climate change. World Economic Outlook (WEO) just released by the IMF, holds bio-fuels responsible for almost half the increase in the consumption of major food crops in 2006-07.

Governments are resorting to desperate measures to address growing social unrest before it destabilizes countries. Pakistan reintroduced ration cards for the first time in two decades; Russia has frozen prices of milk, bread, eggs, and cooking oil; Indonesia has increased public food subsidies; while China, India, Egypt, Vietnam and Cambodia have imposed export controls on key agricultural commodities.

It is however essential to understand the underpinnings of this food crisis before rushing to adopt policy solutions. Over the last few decades liberalization of agriculture, dismantling of state run institutions like marketing boards, and specialization of developing countries in exportable cash crops such as coffee, cocoa, cotton, and even flowers, encouraged by international financial institutions backed by rich countries like the U.S., has driven the poorest countries into a downward spiral, directly threatening food security and economic sustainability.

Removal of tariff barriers has allowed a handful of Northern countries to capture Third World markets by dumping heavily subsidized commodities while undermining local food production. This has resulted in developing countries turning from net exporters to large importers of food with food trade surplus of USD 1 billion in the 1970s transforming into USD 11 billion deficit in 2001. Dismantling of marketing boards that protected both producers and consumers against sharp rises or drops in prices, has further worsened the situation.

In the face of the current crisis UN agencies are calling for governments to step up their investments in agriculture and advocating for market efficiency. However these steps will be ineffective if not combined with much needed structural changes that ensure peoples right to food.

First, it is essential to have safety nets and public distribution systems put in place to prevent widespread hunger. The poorest countries lacking resources should call for and be provided emergency aid to set up such systems. Donor countries should provide more aid immediately to support government efforts in poor countries and respond to appeals from the UN agencies.

Second, emergency interventions are required to boost rural development and promote agrarian reforms including land redistribution. Development policies should promote consumption and production of local crops raised by small, sustainable farms rather than encouraging poor nations to specialize in cash crops for western markets. Also national policies involving the management of stocks and pricing, which limit the volatility of food prices are vital for protection against such food crisis.

The creation of these policies however depends on several prerequisites based on the principle of food sovereignty which would allow countries to protect their agriculture and markets. No industrialized country has been capable of developing its agriculture without protective barriers. The current crisis should be the wake up call for governments in developing countries to ensure similar protection for their poorest farmers and consumers and build a new farm economy which should be the centerpiece of the country's development model.

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Item 2

The Oakland Institute Reporter, 29 April 2008
Dangerous Liaisons: A Battle Plan from the United Nations and the International Financial Institutions to Fight Global Hunger

UN agencies are meeting in Berne to tackle the world food price crisis. Heads of International Financial Institutions (IFIs), including Robert Zoellick, President of the World Bank (former U.S. trade representative) and Pascal Lamy, WTO's Director General, are among the attendees. Will the "battle plan" emerging from the Swiss capital, a charming city with splendid sandstone buildings and far removed from the grinding poverty and hunger which has reduced people to eating mud cakes in Haiti and scavenging garbage heaps, be more of the same - promote free trade to deal with the food crisis?

The growing social unrest against food prices has forced governments to take policy measures such as export bans, to fulfill domestic needs. This has created uproar among policy circles as fear of trade being undermined sets in. "The food crisis of 2008 may become a challenge to globalization," exclaims The Economist in its April 17, 2008 issue. Not surprisingly then, the "Doha Development Round" which has been in a stalemate since the collapse of the 2003 WTO Ministerial in Cancun, largely due to the hypocrisy of agricultural polices of the rich nations, is being resuscitated as a solution to rising food prices.

Speaking at the Center for Global Development, Zoellick passionately argued that the time was "now or never" for breaking the Doha Round impasse and reaching a global trade deal. Pascal Lamy has argued, "At a time when the world economy is in rough waters, concluding the Doha Round can provide a strong anchor." Dominique Strauss-Kahn, Managing Director of the IMF, has claimed, "No one should forget that all countries rely on open trade to feed their populations. Completing the Doha round would play a critically helpful role in this regard, as it would reduce trade barriers and distortions and encourage agricultural trade."

Preaching at the altar of free market to deal with the current crisis requires a degree of official amnesia. It was through the removal of tariff barriers, through the international trade agreements, that allowed rich nations such as the U.S. to dump heavily subsidized farm surplus in developing countries while destroying their agricultural base and undermining local food production. Reduction of rice tariffs from 100 to 20 percent in Ghana under structural adjustment policies enforced by the World Bank, rice imports increased from 250,000 tons in 1998 to 415,150 tons in 2003, with 66 percent of rice producers recording negative returns leading to loss of employment. In Cameroon, poultry imports increased by about six-fold with the lowering of tariff protection to 25 percent while import increases wiped out 70 percent of Senegal's poultry industry.

Developing countries had an overall agricultural trade surplus of almost US$7 billion per year in the 1960s. According to the Food and Agricultural Organization (FAO), gross imports of food by developing countries grew with trade liberalization, turning into a food trade deficit of more than US$11 billion by 2001 with cereal import bill for Low Income Food Deficit Countries reaching over $38 billion in 2007/2008.

Erosion of agricultural base of the developing countries has increased hunger among their farmers while destroying their ability to meet their food needs. The 1996 World Food Summit's commitment to reduce the number of hungry - 815 million then - by half by 2015 had already become a far-fetched idea by its 10th anniversary. U.N. Special Rapporteur on the Right to Food, Jean Ziegler, reported last June that nearly 854 million people in the world-one in every six human beings-are gravely undernourished.

So on who's behalf are the heads of the IFIs promoting the conclusion of the Doha Round and further liberalization of agriculture. While Investors Chronicle in its April 2008 feature story, "Crop Boom Winners" explores how investors can gain exposure to the dramatic turnaround in food and farmland prices, a new report from GRAIN, Making a Killing from the Food Crisis, shows Cargill, the world's biggest grain trader, achieved an 86% increase in profits from commodity trading in the first quarter of 2008; Bunge had a 77% increase in profits during the last quarter of 2007; ADM, the second largest grain trader in the world, registered a 67% per cent increase in profits in 2007. Behind the chieftains of the capitalist system are powerful transnational corporations, traders, and speculators who trade food worldwide, determine commodity prices, create and then manipulate shortages and surpluses to their advantage, and are the real beneficiaries of international trade agreements.

The vultures of greed are circling the carcasses of growing hunger and poverty as another 100 million join the ranks of the world's poorest - nearly 3 billion people who live on less than $2 a day. Agriculture is fundamental to the well-being of all people, both in terms of access to safe and nutritious food and as the foundation of healthy communities, cultures, and environment. The answer to the current crisis will not come from the WTO or the World Bank, but lies in the principles of food sovereignty that can ensure food self-sufficiency for each nation. It is time for the developing countries to uphold the rights of their people to safe and nutritious food and break with decades of ill-advised policies that have failed to benefit their people.

* Anuradha Mittal is the executive director of the Oakland Institute. www.oaklandinstitute.org. Learn more about the World Food Crisis at www.oaklandinstitute.org.

 


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