Food Inflation - Trade is part of answer, not part of problem - Lamy
WTO Director-General Pascal Lamy said that “trade plays or can play a better role in addressing the rise in food prices and tackling food insecurity. Trade is part of the solution, and not part of the problem”.
DG Lamy further elucidated:
Barely out of the 2008 food price crisis, the world appears to have entered yet another phase of higher prices. Rising food prices are now stoking global inflation, not to mention political unrest of proportions that we could have seldom imagined.
I worry that whereas various reasons for food crises have been repeatedly rehearsed in the press, and many figures circulated - a serious analytical exercise of why and how the world appears to be experiencing repeated crises has yet to start.
Trade becomes the transmission belt through which supply adjusts to demand. It allows food to travel from the land of the plenty to the land of the few. When that transmission belt is disrupted through trade barriers, unexpected turbulence arises on the market.
Export restrictions play a major role in food crises. There are other trade barriers too, which harm agricultural production, such as tariffs and subsidies, and which prevent food from being produced where this can be most efficiently done.
Clearly we need greater investment in agriculture, a sector in which we have under-invested for a while. In particular, to prepare our agricultural system for the impending climate change that we are likely to witness. This will be vital to “prettying” the supply-side picture.
Some say that part of the solution to price volatility may lie in market instruments; financials instruments, such as futures. Others say that these instruments, while perhaps intended to stabilize markets, can in reality increase harmful speculation. The definition of speculation, in my view, remains open. It is an issue which farmers and food producers have had to contend with since the beginning of time!