The UAE and others have trouble ensuring that their larders stay stocked because free trade in foodstuffs is anything but free as protectionist barriers stand.
Food security keeps its place at the table
What do the Berlin Wall and the UN Food and Agricultural Organisation (FAO) have in common? Not much, on the surface. However, thinking about the fall of the Berlin Wall during the recent 20th anniversary celebrations, I was reminded of some of the more outlandish claims made back in 1989. In particular, you may recall the economist Francis Fukuyama, who famously declared that, with the triumph of free-market economics and liberal democracy, what we were actually witnessing was The End of History, as his essay was titled.
Mr Fukuyama's thesis has been much maligned in the years since - often by those who misunderstood his intention - and indeed three years ago the author himself partially recanted it, disowning the neoconservative philosophy he helped spawn. What makes Mr Fukuyama's 1989 essay so interesting now is the fact that its central tenet, the triumph of the free market, in fact never really emerged. When it comes to consumer goods from China or cars from Germany or even financial services from the UK, there exists a highly developed mechanism of trade between nations which, when allowed to become dangerously unbalanced, resulted in the recent global economic crisis.
However, when it comes to man's most basic commodity, indeed, the first good that man ever brought to market, we are perhaps further from a free market now than we have ever been. Food is today arguably the most subsidised, distorted and regulated commodity on the planet. As the most basic of all tradable goods, the very fact that so few nations are willing to trade it freely demonstrates an alarming lack of faith in the most basic concepts of liberal economics.
Put simply, the real economic crisis is not the one which was manufactured in the subprime mortgage market of the US and which we have been experiencing for the past two years in the shape of declining productivity and trade. The real crisis occurred in the midst of the other and has to a large extent been masked by it. In that crisis last year, nations such as Argentina halted beef exports, which prompted Saudi Arabia to try to lease 5,000 square kilometres of farmland from Tanzania, which led to food riots from Senegal to the Philippines.
It is this crisis - which is currently on pause - which had policymakers most concerned during the 36th FAO conference held recently in Rome. The gathering, which focused on food security, agreed to establish new mechanisms to deal with the problem of rising prices and scarcity of supply, including a reformed FAO committee giving more say to small-scale producers. The organisation hopes the measures will be sufficient to avoid a repeat of protectionist actions which exacerbated shortages during last year's crisis, which resulted in spiralling prices for basic staples.
Questions remain though as to whether the FAO is up to the task of delivering global food security, or indeed, whether it is even fruitful to talk about the problem in such terms. Arguably, the current problem in securing adequate food to feed the world is the product of too much security: too many barriers have been thrown up, both to local and international trade. An ingrained mindset of protectionism across the board continues to hit the poorest the hardest.
Take for example the US, which every year donates hundreds of millions of dollars of food aid. Yet the US farm bill (passed with the support of then-Senators Clinton and Obama) continues to prevent support being given in cash rather than kind. That essentially impoverishes farmers overseas for the benefit of subsidising US growers and creates strong disincentives to the development of local agricultural markets in the hardest hit areas.
The EU, with its infamous common agricultural policy, is no better. That the same heads of state who allow the continuation of these policies should meet in Berlin to celebrate the triumph of western free market democracy leaves a sour taste in the mouth. Rather than the FAO's motto, which translates as "let there be bread", the current rationale remains closer to "might is right". It is the very lack of leadership on this issue by the US and EU which creates the kind of global trading environment where water-poor, resource-rich nations such as Saudi Arabia and Kuwait feel more secure leasing overseas farmland directly, rather than purchasing the produce of that land on the open market. Who can blame those with the money and the need from securing their food supplies, as opposed to trading for them on the open market?
The wrong-headedness of the current approach is typified by the statement of the FAO's head of office in Abu Dhabi, Kayan Jaff, who said before the Rome summit that the best plan for the GCC would be to reduce its reliance on food imports. Instead, he encouraged GCC states to improve agricultural research and practices, and invest in agribusiness. "This will relieve the high dependency on imports, which naturally have also been impacted by recent price and supply shocks," he concluded.
Such a policy, which directly contradicts the most basic principle of comparative advantage, has already been attempted. For two decades, Saudi Arabia attempted to make itself sufficient in grain production, even becoming a net grain exporter for a few years. Giant circles of grain, clearly visible on Google Earth, peppered the desert. The cost was too high, though: a non-renewable fossil aquifer was permanently depleted and the sector required massive state subsidy. As a result, the kingdom decided last year to stop domestic grain production entirely over the coming years and to import all of its grain.
It should be a simple transaction: sell oil, buy food. The fact that it is not, indeed the fact that a paid employee of the FAO, whose role it is to expedite the global food industry, should go so far as to advise against it in favour of desert agriculture, should give us all pause for thought. Twenty years on, when it comes to food, we remain a long way from freedom. Oliver Cornock is the regional editor of the Oxford Business Group