Revolution needed to meet coming food demands

By Alex Evans and Eyasu Solomon
PART II

Although the Central Emergency Response Fund – in which funds are allocated before emergencies – is likely to meet its 2008 target of $500 million, this remains a small proportion of the overall requirement.

Humanitarian requirements in 2007 were $4 billion, for example, and the older, more reactive Consolidated Appeals Process remains the main window for funding.

Numerous countries have already reacted to rising food prices with concern and a broad range of policy interventions designed to address the situation. The approach taken by most countries so far (Azerbaijan, Bangladesh, Bosnia, China, Egypt, Ethiopia, the EU, Ghana, India, Indonesia, Mexico, Morocco, Nigeria, Peru, the Philippines, Russia, Taiwan and Turkey) has been to reduce or eliminate import tariffs.

However, at least some of these reductions in import tariffs have been offset by the imposition of additional export tariffs or quotas by other countries – some of them major producers – in order to reduce domestic prices (Argentina – where the move has led to major unrest among farmers – China, India, Kazakhstan, Ukraine and Vietnam). Among other approaches currently being tested are making purchases to establish or replenish stockpiles and strategic reserves – which in turn increases pressure on prices (Iraq, Malaysia, Turkey and the UAE); increasing subsidy levels (Egypt, India and Oman); capping prices (China, Russia and Thailand); and examining the possibility of introducing rationing (Malaysia and Pakistan).

Various countries have witnessed protests, riots or other forms of civil unrest that are at least partly attributable to rising food prices.

At the time of writing, some of the most serious disturbances so far have been in Egypt, Haiti and Lebanon; unrest has also been experienced in Burkina Faso, Cameroon, China, Côte d’Ivoire, Guinea, Mauritania, Mexico, Morocco, Mozambique, Niger, the Philippines, Senegal, Uzbekistan, Vietnam and Yemen.

As these lists show, rising food prices are of concern in every part of the world, and so far there is little consensus among governments on what to do about the issue.

Currently most donors appear to be in information- gathering mode themselves, although World Bank President Bob Zoellick has called for a ‘new deal’ on food, including a recommendation that countries investigate cash transfers targeted at poor consumers, rather than the less efficient option of regulating food prices across the entire economy.

There is significant scope for donors to help developing countries to share information on which approaches have worked where.

The World Bank has argued that more expensive food imports will disrupt the trade balances of relatively few countries, because the majority will see largely offsetting gains in other commodity exports; from the Bank’s perspective, the countries most adversely affected include Jordan, Egypt, the Gambia, Lesotho, Djibouti and Haiti.

However, the impact of rising food prices needs to be looked at in tandem with concurrently rising energy prices, which are also imposing strain on many importing countries.

An International Energy Agency study in December 2007 found that the rising cost of oil had already wiped out the benefits of increased aid and debt relief to 13 non-oil-producing African countries including South Africa, Ghana, Tanzania, Ethiopia and Senegal.

According to the IEA, the increased cost of oil bought by these countries since 2004 was 3 per cent of their combined GDP – more than the total sum of debt relief and aid they had received over the past three years.

If the combined effect of higher food and energy prices is to create balance-of-payments problems for countries, the question of compensatory financing may emerge as a significant issue.

So far, the International Monetary Fund reports that demand for financing from funding windows such as the Exogenous Shocks Facility has been low, although critics retort that this is at least in part because of the significant conditionality attached to such lending.

It is also important to note that funding windows designed to provide liquidity on shocks such as sudden changes in terms of trade are built on the assumption that such shocks will be short-lasting.

If – as suggested earlier – food prices have risen as a result of a longer-term structural shift, then there are open questions about how quickly countries taking out loans will be able to pay them back, potentially heightening pressure to increase the concessional element of such loans.

What does all this mean for policy-makers – and especially for donors?

Start with what rising food prices mean for the humanitarian system, where short-term pressures are likely to be most acute.

First, consider the issue of aid volume in the context of humanitarian assistance. As noted earlier, the World Food Programme has called urgently for an additional $500 million.

Given the scale of recent food price increases, it does appear likely that additional funds will be needed just to maintain current levels of food assistance.

It would be of particular concern if the US were to follow up on suggestions that it might reduce the amount of food aid it provides to the WFP as a result of rising prices and costs, given that the US is by some distance the largest donor to the programme.

(Washington is reported to have told the WFP that it is facing a 40% increase in food commodity prices compared with last year, and hence will ‘radically cut’ the amount it gives away – although more recently it has announced a $200 million increase in food aid, suggesting that this risk may have abated somewhat.

But at the same time, more specificity is needed on how the WFP’s headline figure breaks down. It would be useful, for example, to know how the $500 million would be distributed between different types of aid (such as food aid, vouchers or cash transfers), and between which recipient countries.

It is also essential that the WFP’s call for additional funds be set in the context of the needs of the UN humanitarian system as a whole, given that the programme accounts for only around half of total global food aid.

While there is no doubting the WFP’s effectiveness in setting out its case, donors also need to hear from other multilateral agencies (notably UNICEF, the UN Development Programme, FAO and the World Health Organization), and ensure that OCHA (the UN’s Office for the Coordination of Humanitarian Affairs) is in the lead on coordinating funding calls as well as other emergency action from across the sector. This raises the question of wider humanitarian system coherence.

While progress was made in 2005 on Strengthening OCHA’s coordination role at global level, on the role of Humanitarian Coordinators in country and in the use of pooled funding arrangements, much remains to be done.

The WFP has much to contribute here. It is fair to say that at the time of the UN High Level Panel on System-Wide Coherence in 2006, the WFP was not among the principal enthusiasts for a more coherent approach. But as the humanitarian system moves into a demanding context with the potential for faster-paced operations, better interagency coherence becomes more important than ever.

On a related note, it would be interesting to explore the possibility of a ‘one UN’ initiative on food security, which could bring a harmonized approach to bear both at the global level and in specific countries (UNDP’s office in Yemen has already been approached by the government with a view to piloting such an approach).

Such an initiative might bring together the WFP, FAO, IFAD, UNICEF,UNDP and WHO, and focus on developing and mobilizing resources for a package of policies and programmes, potentially for presentation at the Secretary-General’s summit meeting on the Millennium Development Goals in New York in September 2008.

Another important current issue is changing ways of giving humanitarian assistance. As noted earlier, many donors (including the WFP) are increasingly focusing attention on social protection programmes, given that poor countries tend to lack social welfare systems – a deficit that places many poor people with precarious livelihoods at acute risk from economic shocks and stresses.

For such vulnerable people, access to food is as important as the availability of food, and social protection programmes can play an important role in closing the gap.

But it is important to stress that the current enthusiasm for social protection approaches is relatively novel, and that the evidence base on the effects and challenges of such projects is not yet as extensive as it could be.

In particular, humanitarian donors need to be acutely aware of the political impact of a large-scale shift towards the provision of safety nets.

If donors provide cash or food directly – as opposed to through national governments – then there is a potential risk of diluting states’ own accountability to their citizens.

Better answers are also needed to questions about the potential inflationary impact of some social protection measures, the best combination of cash and in-kind transfers, what kind of targeting and conditionality works best, and so on.

It is too soon to see social protection systems as any kind of panacea to the issue of high food prices. Donors should also assess carefully what the value added would be of the WFP’s moving into wider social protection, given the humanitarian sector’s relatively limited experience of social safety nets, and the extent of the organizational change and shift away from traditional core business that this would imply for the WFP.

In the background lies the question of what it will mean for humanitarian assistance if (as considered earlier in this paper) the recent shift to higher food prices is structural rather than just a blip – if, in other words, this is the ‘new normality’.

At present, around 850 million people are classified as ‘food insecure’.

At times of peak demand, humanitarian agencies have been able to feed about 100 million people at the very most.

If a longer-term effect of changes in world food markets were to increase the number of people in need of humanitarian assistance significantly beyond that level, then it is not clear that the humanitarian system would have the capacity and knowledge to respond, even if sufficient financial resources were available.

It is therefore essential that in addition to coping with the current short-term turbulence in food markets, donors make a sustained effort to ask ‘what if?’ questions and plan for further contingencies.

As discussed above, the implications of higher food prices extend far beyond humanitarian assistance. The Suddenness with which the issue has emerged has raised not only the political stakes, but also the risk of knee-jerk policy responses.

Meanwhile, the complexity of the drivers of rising food prices makes a comprehensive approach essential – while also increasing the likelihood of unintended consequences from policy responses.

Policy-makers therefore face an awkward and hazardous balancing act between the urgency of responding, on the one hand, and taking enough time to understand the consequences of what they are doing, on the other.

The remainder of this paper identifies some of the larger policy questions that arise for aid donors.

In most cases it does not attempt to answer them; at this stage, the aim is to build the evidence base and to act as a catalyst for more intensive and thorough conversations, involving a wider range of actors, with the objective of building shared awareness around the issue.

With that caveat stated, consider the following issues: Increasing supply. Perhaps the hardest question is how the world is going to increase food supply to meet the huge rise in anticipated demand noted at the beginning of this paper.

Much work needs to be done, quickly, to figure out where this increase is going to come from (both geographically, and in terms of new agricultural techniques and technologies), and what needs to be done to make it happen.

An urgent first step towards increasing the available food supply should be to ensure that production of biofuels does not undermine food security – an issue now acknowledged by President Bush, who has commented that ‘If you look at what is happening in corn, you’re beginning to see the food issue and the energy issue collide.’

While an outright ban would probably be unwieldy and undesirable, discussion of basic standards for bio fuels production – with food security at their heart – should be an early priority for policy-makers. Helping low income countries to benefit.

While supply increases in the shorter term are likely to come from existing ‘breadbasket’ countries such as the US, Canada, Russia, Ukraine, Brazil and Argentina, there is longer-term potential for lower-income countries to play a significant part as well – especially in Africa, largely bypassed by the first Green Revolution, where productivity remains far lower than in other regions .

But although poor countries should in theory be able to benefit from rising prices for agricultural commodities, the reality is that they are held back by poor infrastructure, the need for better access to technology and finance, restrictive supply chain standards and other barriers as well.

Aid donors therefore need to be clear about how crucial their role will be in this. Until recently, agriculture was seen as a rather unfashionable relic of the past in many donor agencies (and perhaps especially in their country offices).

That needs to change quickly: donors need to invest heavily in programme aid – and in many cases, rebuilding their own capacity – in rural development.

Managing scarcity. Donors will also need to be capable of helping countries to devise integrated strategies for managing scarcity in land, water, energy, food and the effects of climate change.

The first step towards this is mainstreaming throughout donor agencies a much better sense of how these scarcity trends link to each other – as they all do, frequently in subtle and complex ways.

On top of that, donors need to integrate scarcity issues more thoroughly into their governance and economic analyses (as underlined by the role of land disputes as a catalyst for the recent post-election violence in Kenya).

Within the specific context of food, a good starting point would be to build a much more comprehensive picture of the overall resource footprint of different foods (and in the process, move the debate on from its current unsophisticated focus on the minutiae of specific variables, such as ‘food miles’).

Trade

Donors also need a clearer picture of the trade dimensions of the current food prices issue. As noted earlier, the current picture of food-focused trade measures is growing more complex by the day, as importers lower import tariffs even as exporters raise export tariffs.

Meanwhile, some countries – including China – are apparently exploring the potential for bilateral food supply arrangements, of the kind already becoming more common in energy supply. Other countries are displaying enthusiasm for import substitution policies – most notably the Philippines, which has announced its intention to move from being one of the world’s largest importers of rice to self-sufficiency within just three years. Donors and development advocates need to find their way towards a renewed strategic stance on agricultural trade.

Even before food prices began their sharp increase, there was lively debate in the donor community about the extent to which agricultural trade liberalization would in practice benefit low-income countries.

That debate is now further complicated by the fact that even if liberalization is desirable in principle, careful attention will need to be paid to the need to sequence reforms, in order to avoid (for example) the risk that rapid elimination of Common Agricultural Policy export subsidies could increase food prices in developing countries.

Finally, there is the elephant in the room: the long-term question of fair shares, pithily illustrated in a recent cartoon in the US in which a portly man in a suit takes a maize cob out of an African child’s food bowl, with the speech bubble, ‘Excuse me. I’m going to need this to run my car.’ Inequality between countries is falling for the first time in a generation.

From 2003 to 2007, per capita income grew faster in every region of the South than in developed countries: hardly news in East and South Asia, but a major shift in Latin America and Africa. In 1980 developed-country GDP was 23 times higher than in developing countries; in 2007 it was 18 times higher.

Yet even as inequality between countries falls, it is rocketing within them – particularly within developing countries, and above all in emerging economies such as China, where the difference between the top 20 per cent and the bottom 20 per cent has grown by 40 per cent over the last three years.

In his book Development as Freedom, Amartya Sen observes that ‘the focus has to be on the economic power and substantive freedom of individuals and families to buy enough food, and not just on the quantum of food in the country in question.’

Later, he observes that ‘[some] who buy food may be ruined because the real purchasing power of their money incomes may have shrunk sharply.

Such a famine may occur without any decline in food output, resulting as it does from a rise in competing demand rather than a fall in total supply.’ Now, Sen’s questions may be starting to apply at the global level.

Even while the line between developed and developing countries grows more blurred with each passing year, the gulf between the haves and the have nots has never looked wider.

In a context of increasing tightness of food supply – which is likely to grow further as population, affluence and scarcity trends all continue to rise – we may well reach a situation in which relative inequality can have absolute implications for the world’s poor, and in which a burgeoning global middle class inadvertently takes food beyond the purchasing power of the world’s poorest people. Indeed, we may already be there.

This is a time of massive change for global food policy, in developed as well as developing countries.

In addition to the concerns discussed in this paper about what higher food prices mean for poor people, there are questions about environmental standards; obesity and health; animal welfare; competitiveness, between countries and companies; the security of globalized ‘just-in-time’ supply chains; and numerous other issues.

At the heart of these debates is the deceptively simple question: what should global food policy be trying to achieve?

We need to be clear at the outset about the nature of the choices that we face. There are real tradeoffs between different potential objectives in food policy – such as competitiveness for consumers, security of supply, environmental conservation, local sourcing.

That raises the question: who is the ‘we’ that decides the shape of 21st-century food policy? Who has the power to make choices?

Evans & Eyasu can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it & This e-mail address is being protected from spam bots, you need JavaScript enabled to view it