At the recent Group of 8 summit, leaders agreed on the need to rekindle the Doha Development Round (D.D.R.) trade negotiations and set a 2010 deadline for their conclusion. Agricultural trade reform remains the principal — but not sole — hurdle in bringing the Round to a successful end.
The Doha talks collapsed in 2008 among the wreckage around that year’s food, financial and economic crises. Since then, President Obama has replaced President Bush in the White House, and the House and Senate have moved even more strongly into Democrat hands. Normally, hard times and liberal politics would not be considered a promising combination for trade reform. So, why is there renewed interest in wrapping up the D.D.R.?
For one thing, the current hard times have heightened awareness of the risks of replacing a rules-based global marketplace with unilateral protectionist actions. The 2008 food crisis showed some of this risk, with more than 30 countries imposing various forms of export or price controls on staple foods. These self-protective acts made global food prices more, not less, volatile and international food supplies less, not more, reliable. They shifted burdens of adjustment onto some of the countries least equipped to handle them while dampening production signals in a number of exporting countries.
Wealthier food-importing countries recently have pursued a new strategy to enhance their own food security, buying up productive land in poorer developing countries to serve their own food-import needs. Such dedicated supply chains again add stress to the global food system, shrinking the supplies available to meet general market requirements. A better way needs to be found for assuring access to staples for all countries in which food imports are an important source of supply.
At the same time, the spread of the economic crisis in late 2008/early 2009, the stimulus and recovery measures undertaken by various countries and the debate over the degree of "decoupling" of the rapidly developing countries from the developed ones have all underlined the "interconnectedness" of national economies. They also have made clear how important global trade has become as an engine of growth for the world economy as a whole.
No doubt this awareness helped restrain the number and degree of protectionist steps countries took to deal with their falling production and rising unemployment. But the political pressures to protect domestic industries and jobs remain. A stronger bulwark against protection is needed.
Political leaders, reluctant to launch into a downward spiral of escalating protectionist initiatives like those that deepened the Great Depression, now see the Doha trade negotiation as a better way to energize a global economic recovery. Acknowledging the reality of mutual dependence, however, does not resolve any of the substantive disputes that led to the collapse of the negotiations a year ago. This seems especially true for the agricultural talks, in which the emphasis on reducing trade-distorting domestic supports, export subsidies and import barriers may need to be supplemented by new ideas.
Two concerns in particular have emerged as candidates for new approaches. The first is the industrial use of grains. When the Doha Round began in 2001, industrial use of grains was relatively modest and its share of disappearance relatively stable. Both have changed since then as biofuels production has accelerated.
The International Grains Council now projects industrial grain use to reach 15% of global grain consumption in 2009-10. Industrial use of coarse grains may reach 237 million tons, or 22% of total use, in 2009-10, up 35 million tons since 2007-08 alone and now more than 50% above food use of 155.6 million tons. U.S. ethanol production is the major driver behind this growth, potentially putting U.S. ethanol subsidies, mandates and import duties on the bargaining table.
The other concern is food security. There are, for example, more than 20 countries, predominantly in Africa, that suffer from high levels of chronic hunger while also being heavily dependent on imports of both food and energy. With energy and food prices both becoming less stable and likely to rise over time, their food security is at high risk. Many other food-importing countries share similar concerns but to a lesser degree. Some combination of intensified economic development, more assured access to supplies and enhanced ability to pay will be needed to allay these concerns.
So, hard times have heightened awareness of global connections and brought a renewed sense of urgency to concluding the D.D.R. They also have added new challenges to an already burdensome negotiating agenda.
This article can also be found in the digital edition of Milling and Baking News, July 28, 2009, starting on Page 26. Clickhere to search that archive.