The World Food Crisis and Agricultural Protectionism

An article by Frank    3 Comments

A recent leaked report from the World Bank shows that the reason for the sharp increase in global food prices that has lead to an escalating world food crisis is biofuels and the redirection of needed wheat and maize stocks from the European Union and the U.S towards the production of such fuels.

One thing not being addressed is the clear centrality the EU and US have in supplying such an essential food group to large parts of the world and the dependence of developing nations on these two powerhouses to supply such food needs.

An area that needs to be addressed is agricultural protectionism as it is this that has crippled the ability of many developing nations to meet their own food needs and it is only changes in this area that can curb this problem in the long term.

Allow me to offer a brief explanation of the problem.

A lack of agricultural supply has not always been a problem in many developing nations. Many nations were once able to supply their own food needs. In times of need though, in order to access free trade agreements with many developed countries and to access loans from organisations like the World Bank and the International Monetary Fund, they had to do things such as lifting the subsidies they were supplying for their own agricultural industries, thus their own industries had to supply their products at higher prices to cover their own costs.

The developed countries supplying the loans (generally extremely high interest loans) and entering the free trade agreements most often did not do the same and were not required to do so in the agreements. Such nations continued (and still continue) to heavily subsidize their own agricultural industries, thus engaging in agricultural protectionism. The result is that the protected and subsidized agricultural producers were/are able to ship their products into the non protected, developing markets at much cheaper rates than local agricultural producers, thus undercutting locals and destroying their viability in their own markets.

This eventually lead to the destruction of many agricultural and food supplying industries in developing nations and the European Union and United States became the major suppliers of basic food groups to these developing nations.

Now we have a situation where grains in the European Union and United States are being diverted to the production of biofuels after creating a situation where developing nations cannot supply their own food needs and it is driving the price of agricultural food supplies through the roof and out of the grasp of already struggling people groups.

What we are faced with is an opportunity. The only long term solution to the world food crisis is a strengthening of agricultural industries in developing nations so they can return to supplying their own food needs and reduce their reliance on the subsidized supplies from areas like the European Union and United States.

Both the European Union and United States need to recognize the part they have played and work out how they can be part of the solution. Developing nations need to be able to protect their agricultural industries and real work needs to be undertaken to see them grow again. They need to be lifted towards self reliance again.

If it is not done, the world food crisis will blow out of control and snowball into a crisis like nothing we have ever witnessed before.