Cornerstone Global Associates

World Trade and private sector engagement to fight food insecurity

Posted by: simona on: June 15, 2012

Simona Maria Ross, Cornerstone

In 2009 at the G8 Summit in L’Aquila, leaders from all around the world agreed to “act with the scale and urgency needed to achieve sustainable global food security.”1 As a result of continuing underinvestment in agriculture, the devastating impact of the financial crisis and unevenly favoring of world trade regulations, millions of people suffer severe poverty and hunger. Thus global leaders called for attention and increased investment for food security and agriculture.

‘As part of the G-8’s focus on food security, the Administration announced a "New Alliance for Food Security and Nutrition," which could raise 50 million people out of poverty over the next 10 years. An essential element of the program is collaboration with the private sector, including pledges of roughly $3 Billion in private sector contributions towards food security in Africa. ‘2

How large a role should be played by the private sector? What role should and must governments play? Can these new partnerships develop the right solutions to long-term food insecurity worldwide?

A discussion held by the Washington International Trade Association aims to find answers. Mr. Gawain Kripke from Oxfam America introduces the topic by reminding the audience of a picture, once displayed at the cover of the New York Times, showing tremendous amounts of corn. The picture draws attention to a phenomenon that is considered a problem to industrial countries but would be the solution to the misery of so many poor countries. During the time of the publication, the surplus of corn produced by the Midwest was so excessive that found no meaningful use for it. At that time, alternative use included measures like burning tons of corn in order to generate gas. Mr. Kripke goes on to explain that the food crisis in 2007/08 was a direct result of a sharp increase in food prices, which shows the fundamental role trade plays in food security. The crisis shook up the entire international market system. And finally, in 2009, prices dropped again. However, one needs to ask whether this event was a “one time” crisis? In the future, we will certainly see higher prices in these markets. The trade system itself is not based on an dysfunctional idea, but we have to establish hedge strategies to prepare for such crises. One way to do so is by increasing agricultural production and productivity. While Mr. Kripke claims that the Obama administration is doing a lot to address food shortages around the world, he is disappointed by the outcome of the last G8 summit. Even though Obama stands out as a respective role model, other world leaders fail to follow his example. Mr. Kripke smiles and adds cynically that all this does not really matter since there will be another summit next year.

Many countries rely on food import. To prevent shocks caused by rising prices, it is essential to create a safety net that enables the international community to respond quickly to crises. We have to find more sustainable ways to handle and prevent emergency situations that are not limited to the distribution of food. Trade is crucial, but it also gives exporting countries, most of which enjoy a rather successful economic state, the luxury to shift the cost of raising food prices to importing countries. A lot of speculation is done on the food market. Mr. Kripke thinks that this is neither a bad nor a good thing. However, speculation certainly causes instability on the market which mainly affects nations with limited resources. Thus, there is a demand for greater transparency and it is not enough that the U.S. is the only actor that provides such information. Speculation also results in a great quantity of uncultivated land. In order to gain profit, land owners keep their property until its value rises. Therefore, to increase food production, one must secure land and ensure a better access to farming input.

Ms. Peggy Rochette from the Grocery Manufacturers Association reminds listeners of the importance of food safety. Each year, 2.2 million people die due to dirty drinking water and unsafe food. But these people are not the only ones affected – so is everyone along the supply chain. For example, companies lose their credibility and suffer from reduced profits. The government has to regulate the situation, be held responsible for all incidents, and must solve food safety challenges. Most important, the end consumers’ health is at stake.

Trade organizations such as the APEC play a key role in the world market. APEC’s member countries combine 41% of the world population. APEC connects companies from all around the world. The private sector is of great magnitude to provide expertise and capital for agricultural progress. The World Bank launched an extensive project to promote Public-Private-Partnership (PPP). The project coordinates the collaboration of NGO’s, governments and private actors. One example for a successful PPP is the Food Safety Academy (FSA). The FSA provides information and training that aims to advance food management. FSA offers a remarkable networking platform for regulators and academics. According to Ms. Rochette, the program is a win-win-win situation for everyone and helps to decreases incidents caused by unsafe food. Ms. Devry Boughner, director of International Business Relations at Cargill Inc., adds that PPP is like a marriage. While not everyone is perfect, together they will find a solution. Everyone recognizes its strengths and brings them to the table; and all of them agree that making profit is a good thing. If they want to introduce business models that will sustain themselves and free people of the chains of dependence on international donors, they cannot demonize profit. Profit is their common goal and is the driver for enhancing results.

Now, consider the following question: Are regulations more important on the national level or the international level? Well, according to Mr. Jonathan Shrier, from the Office of Global Food Security at the Department of States, they both matter. Nonetheless, national policy strategies matter most since agriculture takes place at the local level. Whether the country is able to attract international investments depends on national regulations as well. But once goods cross borders the law on the international level is crucial. Ms. Boughner agrees that political change needs to happen within the domestic economy. The U.S. Farm bill is a good indication for that. But we are a global society and rules are borderless. Thus, the regulations on the national and international level have to function together. Collective actions are required to tackle crises. Mr. Kripke also says that it is always easier to work in nice offices in Washignton, D.C. and Geneva, Switzerland, but we also have to work on the ground even though it might often be very difficult. To solve challenges faced by third world countries, we have to get a clear picture of their current situation. Since we cannot go to other countries and tell them to follow our model, we will have to lead with good example. However, the U.S. Farm Bill is not a very successful performance that should be imitated by other political actors. Ms. Kuhlmann states that trade policy is based on work done at the very ground level. She recalls a farm project in Tanzania where a young entrepreneur had the idea to establish an agribusiness with potatoes. The local demand for food was enormous and the initiative meant a major opportunity for both the people that profit from the local food supply and the local farmer. Plus, the government along with the international community would be relieved of the burden of providing international aid. Even so, this project was blocked by regulations on all stages and was confronted with a wide range of immediate and international barriers.

For the world to be liberated from poverty and hunger, everyone will have to play their respective role. The government has to enable its citizens to climb up the economic ladder by enforcing economic policies that supports small business and guarantees access to financial resources. The private sector is responsible for establishing an environment that ensures fair participation to small stakeholders. For their part, the people must take economical risks and seek management training that will enable them to have their own income and be independent from financial aid.

References:

G8 Summit Statement on Food Security, “L’Aquila” Joint Statement on Global Food Security – L’Aquila Food Security Initiative (2009); URL: http://www.g8italia2009.it/static/G8_Allegato/FINAL_DECLARATION%5bl%5d,2.pdf

Washington International Trade Association, Food Security 2.0: From L’Aquila and Beyond (2012); URL: http://www.wita.org/en/cev/1376

 

1 G8 Summit Statement, (“L’Aquila” Joint Statement on Global Food Security, 2009)

2 WITA, (Food Security 2.0, 2012)