April 11, 2008 / 6:44 PM / 9 years ago

ANALYSIS-What will Doha really do for world food prices?


By Missy Ryan

WASHINGTON, April 11 (Reuters) - A new world trade deal, more than six years in the making, finally appears to be within reach, but it may not ease raging global food costs that have protesters pouring into the streets from Egypt to Haiti.

On the contrary, many experts expect a new global pact would actually lift food prices slightly, at least at first.

Policymakers plugging the World Trade Organization’s (WTO) Doha round have said closing a deal on the plan to lower farm subsidies and tariffs the world over would stabilize food markets, lock in lower tariffs and spur food production.

If negotiators in Geneva can break a long-standing impasse over subsidies and market access for farm goods, the WTO may call together ministers to seal a deal before President George W. Bush leaves office next January.

"The poor need lower food prices now," Robert Zoellick, president of the World Bank, said recently as he called for a "new deal" to respond to the commodity revolution that has pushed up global food prices by over 80 percent since 2005.

"If ever there is a time to cut distorting agricultural subsidies and open markets for food imports, it must be now. If not now, when?" asked the former U.S. trade negotiator.

Arguing a deal may ease the price crunch is a novel approach for advocates of the Doha round. For years, they said freer trade would help developing nations boost prices for farm exports, in part by cutting price-depressing subsidies in wealthy nations.

"Wait a second," Harvard professor Dani Rodrik said in a recent blog posting. "Aren’t these price effects the main channel through which agricultural trade liberalization in the North is supposed to benefit the South?" he asked.

BETTER FOR WHOM?

Economists have long predicted that a new world trade deal would lift commodity and food prices by a small increment -- a couple of percentage points globally for most products, and a bit more for milk, oilseeds or paddy rice.

Yet they also caution that the benefits of a Doha deal depend on where you sit. It’s good for net exporters of food commodities, like Brazil, Vietnam, or the United States, and bad for those that rely on food imports.

"There are winners and losers," observed Kimberly Elliott, a trade expert at the Center for Global Development.

A recent paper by World Bank economists showed that rising food prices from 2005 to 2007, while differing from place to place, generally deepened poverty in developing countries.

Hardest hit were countries like Nicaragua, where large urban populations saw incomes eaten away at by higher costs.

"There was always concern about net food importing countries," said David Orden, an agricultural economist at the International Food Policy Research Institute.

Even prosperous countries such as the United States, where more people are relying on government-funded food stamps to purchase food, are not immune.

Many countries are scrambling to deal with rising food costs, imposing export restrictions or slashing import tariffs in a bid to ease prices at home.

Experts say any price boost from a Doha agreement would be dwarfed by the boom on commodity markets, awash in massive inflows of investment money and fueled by increasing use of crops to make biofuels, mounting food demand in the developing world, and bad weather that has hurt harvests in many nations.

A THIRD RAIL FOR FARMERS?

Many Doha supporters say booming prices may make it easier for wealthy nations like the United States to cut farm subsidies and help negotiators win passage for a deal.

"It’s so painless," said Charlotte Hebebrand, chief executive of the International Food and Agricultural Trade Policy Council in Washington.

"All of these commitments are so much simpler than they were a few years ago. Let’s get it done," Hebebrand chided.

But U.S. negotiators, who must answer to Congress and, in turn, a powerful agriculture lobby, may be reluctant to commit to cuts that would stick if prices weaken.

As the U.S. Congress has been negotiating a new farm law, many farm-state lawmakers been unwilling to accept major cuts to crop supports, saying their constituents need a safety net in case the current boom evaporate.

Efforts to slash subsidies in the giant agriculture law, still working its way through Congress, fell flat despite pressure from the media, activist groups and budget hawks.

Gawain Kripke, a policy expert at aid and advocacy group Oxfam, said a Doha agreement will be a boon for productivity and poverty in the developing world in the long run.

"Doha will be a good thing to accomplish, but I‘m not sure it will accomplish the short-term issues" related to high food prices, he said.

Experts predict prices will stay high for at least two to three years, until farmers begin to adjust supplies to greater global demand.

"Today’s prices are another warning call that we need a good, open agricultural trading system that gets food produced efficiently and distributed efficiently," Orden said. (Editing by David Gregorio)




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