The nexus between high energy and food prices is unlikely to be broken and will be exacerbated by climate change
Robert B Zoellick, Business Times 3 Jun 08;
AS LEADERS gather in Rome to discuss the global food crisis, our task is clear, but not simple: to help those in danger today and ensure that the poor do not suffer this tragedy again.
What has been described as a silent tsunami is not a natural catastrophe, but is man-made. The nexus between high energy and food prices is unlikely to be broken, and will be exacerbated by global climate change. The results have been rising production and transport costs for agriculture, falling food stocks and land shifted out of food production to produce energy substitutes. This is a 21st century food-for-oil crisis.
In April, ministers from 150 countries, meeting at the World Bank, endorsed a new deal for global food policy. The United Nations summit this week in Rome, the Group of Eight leading industrialised nations' finance ministers meeting in June and the G-8 summit in July offer opportunities for action. We need coordinated steps on policy, backed by resources. Let me suggest a 10-point plan.
Fund emergency needs fully
First, we should agree in Rome to fund fully the World Food Programme's emergency needs, support its drive to purchase food aid locally and ensure the unhampered movement of humanitarian assistance.
Second, we need support for safety nets, such as distributing food in schools or offering food in return for work, so that we can quickly help those in severe distress. The World Bank, working with the World Food Programme and the Food and Agriculture Organisation (FAO), has already made rapid needs assessments for more than 25 countries. In Rome, we should agree on coordinated action.
Third, we need seeds and fertiliser for the planting season, especially for smallholders in poor countries. Together, the FAO, the International Fund for Agricultural Development, regional development banks and the World Bank can expand this effort by working with civil society groups and bilateral donors. The key is not just financing, but fast delivery systems.
Fourth, we need to boost agricultural supply and increase research spending, reversing years of agricultural underinvestment. We must be neither Luddite nor advocates of a single scientific fix. The Consultative Group on International Agricultural Research has been receiving about US$450m a year. We should double this investment in research and development over the next five years.
Fifth, there needs to be more investment in agribusiness so that we can tap the private sector's ability to work across the value chain: developing sustainable lands and water; supply chains; cutting wastage; infrastructure and logistics; helping developing country producers meet food safety standards; connecting retailers with farmers in developing countries; and supporting agricultural trade finance.
Sixth, we need to develop innovative instruments for risk management and crop insurance for small farmers. This week, the World Bank's board will consider weather derivatives for developing countries, with Malawi being identified as a likely first client. Should Malawi suffer a drought, it would receive a payout to offset the price of imported maize.
Seventh, we need action in the US and Europe to ease subsidies, mandates and tariffs on biofuels that are derived from corn and oilseeds. The US's use of corn for ethanol has consumed more than 75 per cent of the increase in global corn production over the past three years. Policymakers should consider 'safety valves' that ease these policies when prices are high. The choice does not have to be food or fuel. Cutting tariffs on ethanol imported into the US and EU markets would encourage the output of more efficient sugarcane biofuels that do not compete directly with food production and expand opportunities for poorer countries, including in Africa. We need to find ways to advance to second-generation cellulosic products.
Eighth, we should remove export bans that have led to even higher world prices. India has recently relaxed its restrictions. But 28 countries have imposed such controls. Removing these could have a dramatic effect. With only 7 per cent of global rice production traded on markets, if Japan released some of its stocks for humanitarian purposes and China sold one million tons of its rice, we could damp the price immediately.
Ninth, we should conclude a Doha World Trade Organisation deal in order to remove the distortions of agricultural subsidies and tariffs and create a more adaptable, efficient and fair global food trade. The need for rules that are agreed multilaterally has never been stronger.
Tenth, there should be greater collective action to counter global risks. The interconnected challenges of energy, food and water will be drivers of the world economy and security. We might explore an agreement among the G-8 and key developing countries to hold 'global goods' stocks, modelled on the International Energy Agency (IEA), governed by transparent and clear rules. This would act as insurance for the poorest people, offering affordable food.
To support this agenda, the World Bank is launching a global food crisis response facility. We will fast-track US$1.2 billion to address immediate needs arising from the crisis, including US$200 million of grants for especially vulnerable countries such as Haiti, Djibouti and Liberia for seeds, fertiliser, safety net programmes and budget support. Overall, the World Bank Group will expand assistance for agriculture and food-related activities from US$4 billion to US$6 billion over the coming year.
The danger is now clear to everyone. The Rome and G-8 meetings need a clear plan to overcome it.
The writer is president of the World Bank Group
