This article was originally published on the website of Ohio State's College of Food, Agricultural and Environmental Sciences.
Nov. 19, 2014
COLUMBUS, Ohio – After a months-long stalemate, the United States and India reached a deal Nov. 13 that would revive World Trade Organization negotiations and help push global customs reforms expected to add $1 trillion and 21 million jobs to the world economy, according to figures from the International Chamber of Commerce.
The key issue behind the dispute: India’s stockpiling of food to ensure its 1.25 billion inhabitants have enough to eat. Under the deal, India agreed to withdraw its veto of WTO reforms but asserted its right to stockpile food without observing the trade body’s usual rules on agricultural subsidies.
Ian Sheldon, an international trade expert with Ohio State University’s College of Food, Agricultural, and Environmental Sciences, said India’s insistence on preserving its domestic food policy while also seeking to become an even bigger actor on the global trade scene is a good example of the delicate balance that many countries often struggle to maintain surrounding issues of food security.
“We, as food trade economists, believe that open international trade helps global food security, not hurt it,” said Sheldon, the Andersons Professor of International Trade in the college’s Department of Agricultural, Environmental, and Development Economics.
“The global trade system plays an important role in promoting global food security, leading to ways of using resources that are most efficient for food production. Also, if you have an open trade system, economies will be more resilient to market shocks.”
However, for this system to work, it needs rules, such as those established by WTO regarding subsidies, tariffs and other protectionist policies, Sheldon said.
Domestic subsidies, such as India’s massive food stockpiling program — which according to a report by news agency Reuters provides cheap food grains to 850 million people — can interfere with free food trade and impact international prices of heavily traded staple crops such as wheat, Sheldon said. This, in turn, can affect food security in both developed and developing nations.
According to the 1996 World Food Summit, food security is defined as “the state in which people at all times have physical, social and economic access to sufficient and nutritious food that meets their dietary needs for a healthy and active life.”
“Trade shouldn’t be done at the expense of securing domestic food productivity,” Sheldon said. “But increasing domestic food productivity with a view to achieving self-sufficiency shouldn’t be a goal in itself. Bad food trade policies can affect overall trade and food security.”
Examples of not very sound food policies can be also be found in the developed world. In the 1980s, European programs intended to maintain domestic food industries led to massive overproduction and the subsequent dumping of products in the market, which resulted in lower international food prices that impacted producing nations.
“International trade should balance the demands of net food-importing countries and net food-exporting countries,” Sheldon explained. “The idea is to have a system with clear rules and a level playing field that can reduce volatility and guarantee stability, availability and access to food.”
But trade can’t fix food insecurity by itself, Sheldon said.
“Food safety nets should also be in place to help with domestic food security for those who don’t have access to enough to eat for of a variety of reasons,” he said.
In the United States, food safety nets include federal food-assistance programs such as the Supplemental Nutrition Assistance Program (SNAP) and the Special Supplemental Nutrition Program for Women, Infants and Children (WIC), which are part of the farm bill.
For other countries, particularly in the developing world, it’s often difficult to implement such food-assistance programs, Sheldon said. Those nations might then resort to other methods to battle food insecurity, including export bans, the stockpiling of grains or the heavily subsidized production of staple crops.
“While as a trade economist I don’t agree with these practices, it is understandable that some countries will resort to them to try to deal with their particular domestic issues regarding food security and the politics of food security,” he said.
Finding an optimal balance between free food trade and effective food safety nets is more important today than ever, as developing nations are playing an increasingly large role in global food production.
“The top global food producers today are China, the U.S., India, Brazil and Indonesia,” Sheldon said. “This means we will be relying on emerging markets more and more for global food production and trade. Top exporting countries such as Brazil will become very critical in meeting food demand in the next 20-30 years.”
Finally, Sheldon said, an effective international food trade system also requires policies that lead to increased production, such as investments in research and development and better infrastructure.
“We should be investing in agricultural productivity in places such as Africa to manage yield gaps and reduce food insecurity in critical parts of the world,” he said.