Stabilising world food prices

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It was an auspicious occasion for the world community, especially for the citizens of the food-deficient countries, when the finance ministers of the G-20 countries reached a historic accord to tame speculative trading in food commodities. The meeting held at Paris pledged to tackle agricultural commodity volatility in the wake of a surge in food prices in 2007-08, widely blamed on speculative trading in commodities that had triggered riots in some countries.

Fresh price spikes at the beginning of this year are also thought to have fuelled the Arab Spring protests. While tightening up market regulation to limit speculation was fully endorsed at the meeting, the G20 finance ministers have, nonetheless, yet to enact concrete measures to achieve the desired objective. In order to ensure stability in food prices, the ministers also agreed to a rapid response mechanism so that the G20 nations, responsible for roughly three-quarters of the global farm output, could respond collectively in the future to contain volatility in output and prices. The agreement also supported establishing an agricultural market information system, or AMIS, to remedy a chronic lack of output and stocks data that is seen as a major source for price volatility. Besides, it was agreed to exempt humanitarian food aid from any additional export taxes or restrictions.

The overall mood after reaching the agreement was so upbeat that France s Minister for Agriculture asserted that Today is a great day. We have reached a historic accord. It is a tour de force or a feat requiring a great virtuosity or strength for the international community. French President Nicolas Sarkozy had earlier told the ministers that by addressing the volatility of the agricultural markets, in assuring food security for the world for today and tomorrow, we will rebalance the structure of capitalism. US Agricultural Secretary called the agreement a historic union of resolve in combating the pressing challenges of hunger and food price volatility.

The agreement also marked a major change for nations such as China and India, which previously had viewed detailed agricultural production and stocks information as too sensitive to national security to share. A source in the Indian delegation was quoted as saying that It is a good vehicle to have an early warning system about the developing situation in some parts of the world. We can prepare well, plan well and the response to the triggers (of price volatility) can be better.

In our view, there can be no argument against the intentions, proposed policy strategies and the resolve of the G20 nations to counter the menace of volatility in world food prices, triggered by factors like speculation and lack of proper and timely information on global food production, stocks, etc. Of course, most of the credit for building the momentum to undertake such efforts goes to France, which has made limiting speculation and reining in markets, a centrepiece of its G20 presidency, saying that it would not accept any fudging on key issues. The agreement was all the more welcome since the finance ministers had gone into the Paris meeting, divided in the beginning about measures to control trading in food commodities and sharing of information about production and stock levels. For instance, while Brazil was opposed to any measures that could impede the free working of the market or could be interpreted as price controls, China and India were reluctant to share information viewed as important to national security.

The fact that all the countries finally abandoned their original positions and agreed on a single platform was undoubtedly a great achievement of the Paris meeting. Although concrete measures have yet to be worked out, yet the determination at the conference showed that the task was likely to be completed in the near future. Needless to say that the agreement at the Paris meeting is a ray of hope for the people of the developing food-deficient countries, who have been hit very hard by the surge in food prices in the recent past. Of course, Pakistan will also benefit from the stability in prices, both as an exporter and importer of food items, through better planning and management of its capital and land resources.

The agreement was not without certain major omissions, however. There was no consensus that the use of farm production to make biofuels had also contributed to rising food prices. In the absence of an agreement on the issue, the ministers only called for more research on the subject. Also missing was any talk on the building of adequate physical stocks of food commodities at appropriate locations for shipment to the deficit areas of the world in emergencies and the devotion of higher level of resources for agriculture research to introduce high-yielding varieties. This was needed because over the past six decades or so, no major breakthrough has been made in this area of research.

The G20 delegates should have also urged upon the developing countries with fast-growing populations to reduce their birth rates and promised them financial assistance if they were prepared to focus on proper population planning. In any case, there is no doubt that the process of stabilising world food prices has been started earnestly and, hopefully, all such issues would be addressed over time for the benefit of ordinary households in various countries of the world.

Courtesy: Business Recorder

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