Pascal Lamy, WTO Director-General, used his keynote speech to a recent congress of European agricultural economists to address a perennial issue in agricultural trade policy, namely, whether agriculture should be treated like shirts, shoes and tyres and fall under the same trade regime?
“Now, while the international community broadly-speaking agrees on what the basic objectives of agricultural policy are, I believe that there continues to be a disagreement on what “global integration” can do for agriculture (in particular, international trade). Is greater global integration beneficial or harmful to agriculture? That is the question that underlies trade negotiations in this field at the World Trade Organization, but it is also a question for which a coherent response has yet to emerge.”
Lamy is an international civil servant accountable to the WTO membership as a whole, where countries hold very different views on this issue. He is thus limited in what he could say, but there are three things worth taking away from his talk.
First, the benefits of trade in food are the same as for other commodities, in that it helps to ensure that production takes place in the most efficient regions. Some of the inputs needed for agricultural production, such as water, are increasingly scarce, so this gain to efficiency will become increasingly important in the future.
Second, he noted the belief in many developing country WTO members that labour-intensive subsistence agriculture, or production for local markets, cannot compete with produce originating in capital-intensive agricultural systems. This belief, in turn, underlies the specificity of the agricultural rulebook in the WTO. But Lamy was clear that international trade was not the origin of the recent food crises. Indeed, price volatility was greatest (for example, for rice) for those products where world markets are most thin.
Third, he addressed the issue of export restrictions which was discussed by the G-20 agricultural ministers in Paris earlier this year. The only agreement the ministers could reach on this issue was that supplies for the World Food Programme for humanitarian interventions would be exempted from export bans, and this recommendation will be taken up at the WTO Ministerial Council meeting in December. It is worth reflecting on Lamy’s comment on how to move forward on this issue:
“But we must ask ourselves why there is such widespread resentment to trade opening, if such opening is indeed vital to global food security. To me the answer is clear. It is because we have yet to build robust safety-nets for the world’s poor. Each and every government must turn its attention to this issue, urgently, in my view. In the absence of such safety nets, there will always be resentment at a time of crisis to a country’s food supply going abroad.”
Lamy’s closing remark was a plea for a shared vision of what global integration can bring to agriculture. From his perspective, international trade is not part of the problem, but part of the solution to global food crises. But designing the rulebook for agricultural trade is very difficult when countries disagree on this basic diagnosis.