The WTO Director-General Pascal Lamy’s suggestion that speedy negotiations in multilateral trade can solve the present crisis of soaring food prices, perhaps has few takers.
His attempt to convene a mini-ministerial on May 19 has become a distant hope and the presentation of revised texts for farm and industrial goods negotiations by the chairs of respective negotiating committees is likely to be delayed.
The issue of rising food prices was raised at the WTO General Council meeting in Geneva on May 7 for the first time and discussed in some details. Contrary to Lamy’s proposal some African countries called for demystifying the link between rising food prices and completion of the Doha Round, instead of rushing through a deal on the pretext of solving the problem.
Though some developing countries like Uruguay, Brazil, China and Mexico have supported Lamy’s proposal that a quick conclusion to the Doha Round would offer medium to long-term solutions to the current crisis, there are still many who view it with much skepticism India supported successful conclusion of Doha negotiations but did not link it to the food crisis.
It is evident that the present food crisis was created deliberately. The massive use of food crops for fuel in Europe and North America and displacement of food crops in many countries by cultivation of bio-fuel crops like Jatropha and other non-food crops are deliberate attempts to engineer a food crisis.
Not only this the bio-fuel programme has caused such a horrible situation which was not experienced earlier – the global food prices are now linked to the volatility of fossil oil prices. The reports of UNCTAD, UN?ESCAP and OECD speak of the food crisis caused by bio-fuel programme in the developed world.
Why such a situation was deliberately created? The developing countries in general were long complaining that the heavily subsidised agriculture in the developed world have been depressing global food prices to the disadvantage of the farmers in the Third World who do not get remunerative prices for their produce.
Thus the present turnaround situation was deliberately master-minded so that the developing countries, LDCs and net-food importers give up their demand for phasing out of food subsidies in the developed world. It was also done with the intention that the developing countries, LDCs and net-food importers lower their tariff barriers and open up for imports and help the US to continue with its dubious ‘food aid’ programme.
Why should the Third World pay for this turnaround situation master-minded in the developed world? The game of subsidy is still there – the ongoing bio-fuel programme is heavily subsidised and incentivised. This highly subsidised bio-fuel programme which endangers food security should be immediately scrapped through an international agreement. For meeting energy needs other viable options should be explored.
This modern neoliberal corporate-led architecture is at a point of collapse. There are enough indications to prove it. The weakening of US dollar, the sub-prime crisis and meltdown in the global equity market show that this artificial architecture has its inherent weakness. To overcome and survive, the global manipulators have created new problems – there is an increased investment in the commodity futures market and food trade, which have also contributed to the global food price rise. The farmers do not benefit from the current food price rise at all – only the market manipulators stand to benefit.
With a view to shift the blame, the US President, George Bush and the Secretary of State, Condoleezza Rice said that the food crisis was due to increased consumption in populous countries like India and China. But Bush should know that the annual per capita grain consumption in US is 1,046 kg, while in India it is only 178 kg.
Switzerland, Japan and US have also said that food export bans imposed by some developing countries have contributed to soaring global food prices. The fact is that some developing countries imposed export bans with a view to check their domestic price inflationary trends. If the developed countries are interested in curtailing the policy space given to countries, it is really a matter of concern.
The pertinent issue which the world leaders need to consider is that in the midst of soaring food crisis and prevalent hunger, major food companies reaped huge profits. The net income of Monsanto for the three months ending February, 2008 more than doubled to $ 1.12 bn from $ 543 mn in the same period in 2007. Its profits increased from $ 1.44 bn to $ 2.22 bn. Cargill’s net income soared by 86% from $ 543 mn to $ 1.030 bn and that of Archer Daniels Midland soared by 42% from $ 363 mn to $ 517 mn.
Index-fund investment in grain and meat increased almost five-fold to over $ 47 bn in the past year according to the Chicago-based AgResearch Co. At the recent Agricultural Forum convened by the US Commodities Futures Trading Commission (CFTC) on April 22, 2008 to discuss these problems, while the official position was to play down speculation and stress fundamentals, such as low physical stocks and increased demand from China and India, all farmers and trade associations blamed the problem mainly on speculative surge from long-only funds. They pointed out that the present situation of high prices which should normally have benefited farmers was actually causing concern. The accompanying high price volatility has led to convergence problems, more basis volatility and a near breakdown of risk management tools that futures markets normally provide. This has increased risk faced by farmers; put farmers, local elevators and other buyers of commodities under pressure of margin requirements and lending limits; and is causing problems in physical marketing.
