WTO says cannot solve food price crisis

GENEVA Wed May 7, 2008 3:04pm EDT

1 of 4. Farmers walk along the paddy field in Karawang regency, West Java province May 4, 2008.

Credit: Reuters/Supri

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GENEVA (Reuters) - The World Trade Organization cannot conjure up a short-term solution to soaring food prices but a successful end to global trade talks would help in the longer term, the organization's chief said on Wednesday.

Staple food prices have risen more than 40 percent in the last year causing shortages, hoarding and riots in many developing countries and prompting the United Nations to warn of malnutrition and social unrest.

WTO chief Pascal Lamy said a deal in the Doha round of trade talks would help soften the impact of high prices by lowering barriers to trade in agricultural products, including subsidies in rich countries.

"Although the WTO cannot provide anything immediate to help solve the current crisis, it can, through the Doha Round negotiations, provide medium to long-term solutions," Lamy said.

To meet its goal of concluding the long-running talks this year, the WTO needs a breakthrough within weeks, Lamy told the WTO's policy-making general council.

"As you are all aware, the overall outcome would be less distortion in world markets and increased international trade, leading to more rapid and efficient adjustment by supply to changes in demand," he said.

Many countries have responded to the high prices by imposing taxes and other restrictions on exports -- allowed under WTO rules -- to try to ensure adequate supplies at home.

Bangladesh said on Wednesday it had banned exports of non-aromatic rice for six months to secure domestic supplies.

Export bans by India and Vietnam, in addition to dwindling world stocks, have helped rice prices in Asia to treble this year, ringing alarm bells for policy makers struggling to rein in inflation.

RESUME SHIPMENTS

India will decide by June whether to sell rice to neighboring states that have asked it to resume shipments but has no plans to relax export curbs significantly soon, T. Nand Kumar, the country's food secretary, told Reuters.

India is also likely to take advantage of this year's bumper wheat harvest to build a stockpile of up to 3 million tonnes after two years when it was forced to import extra grain.

Rice prices have retreated from the record levels they reached last month but the U.S. futures market rose more than 2 percent because of concern that the cyclone in Myanmar, which killed at least 22,500 people, could further squeeze supplies.

The effects of the cyclone that tore through the Irrawaddy delta could turn Myanmar from an exporter of rice to an importer, the U.N.'s food agency said.

The Food and Agriculture Organization (FAO) said the damage to the delta could scupper plans by the southeast Asian country to export 600,000 tonnes of milled rice in 2008 and force it to import instead.

"If post-harvest losses turn out being large, localized food shortages in the short term may result," the FAO said. "Such losses could also impair the country's ability and government decision to export rice in 2008."

Myanmar's military junta insists it has enough rice stocks to keep people fed but the price of small bags has doubled since the cyclone tore through the fertile delta at the weekend.

Thai rice prices eased around 10 percent earlier this week from a record level above $1,000 a tonne after the Philippines scrapped a tender to import 675,000 tonnes.

But, underlining the continued strength of demand in a region where rice is a staple for billions, Thailand -- the world's largest exporter of the grain -- said suppliers were in talks to sell 95,000 tonnes to Sri Lanka and East Timor.

(Writing by Robert Woodward and Ben Tan; editing by Tim Pearce)

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