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Struggle to keep food supplies at home
By Alan Beattie in London
Published: April 1 2008 19:13 | Last updated: April 1 2008 19:13
The rush across the developing world to stop food leaving the region is a perfect example of the old adage: be careful what you wish for.
For years, governments of poor countries, and their champions in the rich world’s development campaigns such as Oxfam, have been complaining bitterly that farm-gate prices have been driven down by overproduction and dumping by US and European farmers. Now, food prices are rising. But the governments involved, rather than celebrating, are scrambling to stop their farmers benefiting too much at the expense of their urban consumers.
EDITOR’S CHOICE
Rush to restrict trade in basic foods - Apr-01Riyadh and Cairo to cut import duties - Apr-01Manila weighs lower duties on rice imports - Mar-31Argentina unveils plan to end farm strike - Apr-01Asia scrambles for rice stocks - Mar-29Unrest grows in Egypt as food prices soar - Mar-26In country after country, angry city-dwellers have poured on to the streets complaining about the unaffordability of food. Mexico City has witnessed “tortilla riots” because of the high price of maize, and thousands of Indonesians have protested over shortages of soy beans.
The problems are particularly salient with basic grains such as rice and wheat that provide the staple food for many developing countries but in which there is a big international market where farmers can seek out the highest price.
Dry Middle Eastern countries such as Egypt, which imports about half its staple foods of wheat and maize, and sub-Saharan African countries with low crop yield and unreliable harvests have long been concerned about relying on imported food. They have frequently intervened heavily to ensure a reliable domestic food supply, subsidising farmers and imposing import tariffs to prevent them being undercut when global prices are low.
Saudi Arabia, which on Tuesday cut wheat tariffs to zero, used to subsidise its inefficient farmers so heavily that it was once one of the world’s 10 biggest wheat exporters.
But now highly efficient net exporters of food such as Argentina and Vietnam are also restricting exports.
Governments are keen not to let the cost of living rise out of control. Antoine Bouët, senior research fellow at the International Food Policy Research Institute in Washington, says governments’ reactions risk making the situation worse.
“This policy response simply amplifies the shocks,” he says. “Each time a big producer like Vietnam in rice restricts exports, it has a knock-on effect on the world market.”
The battle over food trade is much more a fight of interest groups within each country than between one nation and another. The policies recall those followed for several decades by many developing country governments, which controlled food costs to protect themselves from urban unrest.
Such policies were largely unwound during the 1980s and 1990s, particularly at the behest of the IMF and World Bank, which pointed out that government-imposed ceilings on food prices were driving farmers out of the countryside and further reducing food supply. The removal of such controls provoked food riots in developing countries as city-dwellers demonstrated against the cut in their purchasing power.
Governments are now adopting similar curbs in an attempt to prevent renewed protests. Governments like those of Cristina Fernández in Argentina “represent the urban areas more than the farmers”, Mr Bouët says. “These moves are clearly politically motivated”.
But few economists think intervening to block exports is a sensible way of redistributing income from farmers to consumers, not least because – as is the case in Argentina – farmers can react by causing food shortages by refusing to supply the domestic market. In the longer term, higher food production is likely to be a better permanent solution.
And to cope with rising prices, Mr Bouët says, a better policy response would involve increasing government cash transfers to poor households to cushion the impact on their income.
However, such mechanisms can be expensive and difficult to set up, and governments facing a hungry populace often reach for the most immediate solution.
