G-20 Agriculture Ministers Unveil Plan to Tackle High Food Prices
In their first-ever summit, agriculture ministers from the Group of 20 (G-20) leading economies gathered to tackle high and volatile food prices. The Paris meeting, held on 22 and 23 June, ended with the release of an "Action Plan" that drew both praise and criticism. The plan will be evaluated at the G-20 summit in November, where heads of state will meet to decide whether to approve the measures outlined.
French agriculture minister Bruno Le Maire led the meeting, as France currently holds the presidency of both the G-20 and the G-8 groupings. While the former is made up of 19 countries, plus the 27-member EU bloc, the latter only includes Canada, France, Germany, Italy, Japan, the United Kingdom, the US, and Russia.
Prior to the meeting, Le Maire had pushed strongly for a G-20 farm deal that could be presented at November's summit of G-20 finance ministers. Le Maire told reporters that "all the countries of the G-20 will have to assume their responsibility for taking crucial decisions for world agriculture."
After the meeting, Le Maire viewed the outcome favourably, telling Reuters that the agreement constitutes "a first step, a positive step, and also an impetus that has been given to investment in agriculture."
World Bank President Robert Zoellick, while finding the plan to be a "good start," avoided calling the Action Plan a perfect solution: "Are we there yet? No. It's too early to take a victory lap and I urge the G20 Heads in November to follow through on the important steps made today."
Speaking to reporters, Zoellick also cautioned that "agriculture has been the sticking point for international agreement after international agreement. Food may be the essence of life but for years it's also been the essence of national security and national sovereignty."
The plan released by the agriculture ministers makes a series of proposals with detailed action steps; these include setting up a research initiative for wheat, an information-sharing system on food stocks, a "rapid response forum" for senior G-20 agriculture officials to evaluate and respond to food crises, and a global agricultural monitoring initiative to produce and release agricultural production forecasts.
Notably, ministers also agreed to remove export restrictions on food destined for humanitarian purposes, and noted their opposition to export restrictions generally. For more on the export restrictions subject, please see our follow-up article later in this issue.
While many heralded the action plan as a step forward in tackling the widely-publicised food security problem, others found the declaration to be less substantive than expected. The Financial Times reports that Brazil, China, and the US all lobbied against proposals for reductions in biofuel usage and export restrictions. The Action Plan's language regarding these subjects has come under fire from organisations such as Oxfam, which noted that the G-20 could do more on both issues.
Treatment of biofuels raises eyebrows
The release of a draft communiqué prior to the meeting suggests that ministers were initially going to push for a harder line on biofuels, which have been blamed by critics for pushing up food prices.
Reuters reports that a WTO official who attended the meeting found biofuels to be a "very contentious issue, with lots of resistance from Brazil to any language that would give the impression that biofuels from food are not desirable."
Stefan Tangermann, a professor at the University of Göttingen in Germany and formerly the OECD's Director for Trade and Agriculture, emphasised that political concerns on behalf of some countries, particularly the US, likely played a part in limiting the declaration's language on biofuels. In addition, Brazil, "being a major producer of biofuels, also has an interest in keeping" biofuel production going - however, he added that the biofuel industry in Brazil is primarily market-driven, not subsidy-driven like the US.
The declaration's final language on biofuels disappointed several onlookers, as the draft declaration had asked for further analysis on the possibility of using flexible mandates to resolve price volatility and food security issues. However, the language on flexible mandates - which allow biofuel production to rise or fall depending on the relationship between feedstock costs and biofuel prices - was removed in the final version, with ministers calling instead for further analysis on the general relationship between biofuels and food security.
Romain Benicchio, a policy advisor at Oxfam International, told Bridges that his organisation "believes that G20 governments should urgently agree to phase-out biofuel mandates and subsidies that provide damaging incentives to divert agricultural feedstocks to fuel." He added that "G-20 governments should have been more ambitious in developing contingency plans to adjust policies that stimulate biofuel production or consumption when global markets are under pressure and food supplies are endangered."
However, Benicchio noted that, while the "lowest common denominator [in terms of biofuels] has prevailed," at least the issue "is now firmly on the G-20 agenda and further work is anticipated." Given that this is the first time G-20 agriculture ministers have met formally, there is "still time to make progress before the Heads of State Summit in November" on this and other contentious subjects.
Iowa State economics professor Bruce Babcock, who in a recent ICTSD-published study suggested flexible mandates as a policy alternative to resolve the biofuels controversy. However, he noted that there are challenges involved in using flexible mandates.
Speaking to Bridges, he stated that "such a move would increase uncertainty in terms of the quantity of the biofuel in the market." He noted that Brazil already has such a mandate with regards to the percentage of ethanol used in gasoline, which it adjusts "to reflect the cost of producing ethanol."
Earlier this month, the United Nations Food and Agriculture Organization (FAO) and the Organisation for Economic Co-operation and Development (OECD) jointly released a report, which they had prepared in collaboration with various other agencies, regarding the price volatility issue and possible policy responses. The report took an especially strong stance on biofuels, noting that all of their projections "suggest that biofuel production will exert considerable upward pressure on [food] prices in the future."
The report went on to add that government mandates, such as for blending "fixed proportions of biofuels with fossil fuels, or binding targets for shares of biofuels in energy use" would cause biofuel production to ""aggravate the price inelasticity of demand that contributes to volatility in agricultural prices." The fact that agriculture ministers chose not to use the "flexible mandate" language in their declaration, in spite of the report's findings, was the source of further criticism.
However, recently-elected FAO chief José Graziano da Silva, who will take office at helm of the UN agency on 1 January 2012, defended the use of biofuels at his first post-election press conference on Monday; as mentioned previously, ethanol production is a major industry for his native Brazil. He told reporters that "biofuels are not the silver bullet [for solving the energy problem], but they should not be demonised either."
The debate over biofuel subsidies has recently taken centre stage in the US Congress, after the Senate voted on 16 June to end federal support for ethanol. While the bill would still need both approval from Congress' other legislative chamber, the US House of Representatives, and from the executive branch, the Senate effort has prompted some observers to wonder if the US attitude toward subsidies is beginning to shift.
Trade a recurring theme
In their declaration, ministers also alluded to the struggles facing the Doha Round of trade talks at the WTO, "underlin[ing] the need to bring the Doha Development Round to a successful, ambitious, comprehensive, and balanced conclusion."
Agriculture leaders also emphasised the need to "recall commitments in previous G20 Leaders' Summits since 2008 to refrain from raising existing trade barriers or imposing new trade barriers or implementing WTO inconsistent measures that undermine global trade."
WTO Director General Pascal Lamy, speaking to the Trade Policy Review Body on 21 June, has openly expressed his concern about rising trade restrictions, as the "monitoring of trade measures reveals that trade restrictions over the past six months have become slightly more pronounced than in previous periods." Among the barriers that have become more prevalent are the above-mentioned export restrictions.
ICTSD reporting; "World Faces Century of Hunger Without Farm Deal, France's Le Maire Say," BLOOMBERG, 17 June 2011; "G20 agrees measures to tackle high global food prices," BBC, 23 June 2011; "FAO's new chief defends biofuels," 28 June 2011; "G20 attacked on food crisis plan," FINANCIAL TIMES, 23 June 2011; "FAO's new leader lays out his plans," THE GUARDIAN, 27 June 2011; "Main points from the meeting of G20 agriculture ministers," THE GUARDIAN, 23 June 2011; "G-20 Officials Agree on Steps to Stabilize Food Prices and Improve Supplies," NEW YORK TIMES, 23 June 2011; "France sees G20 farm deal as a first step," REUTERS, 23 June 2011; "G20 leaves biofuels industry unscathed - for now," 23 June 2011, REUTERS; "Senate vote marks start of end for ethanol subsidies," 16 June 2011, REUTERS.