Politicians continually bring up the subjects of energy and food security; but they mostly discuss them in economic terms. They stir populist fervor by saying that they will promote policies that foster national self-sufficiency in both sectors. For Americans, such policies sound great — who doesn’t want to decrease the flow of money out of the country for oil and food and reduce the trade deficit? In the age of globalization, however, such efforts have proven stillborn. Why? Mainly because Americans like their cars, appreciate variety in their diet, and remain consumers who like the lowest prices they can find. Of course, Americans aren’t alone in discussing security issues in terms of becoming self-sufficient.
The 2008 food crisis started a lot of countries thinking about how they could secure their food supplies and their ponderings often led them down the self-sufficiency path. That begs the question, “Is food self-sufficiency a good thing or a bad thing?” Cargill, an international producer and marketer of food, agricultural, financial and industrial products and services, believes self-sufficiency is an unrealistic goal at best and could threaten global food security at worst [“Cargill warns on self-sufficiency,” by Javier Blas, Financial Times, 10 November 2009]. Blas quotes a top executive at Cargill who claims “that the idea that countries ‘can be self-sufficient in every single food is a nonsense’.” He’s probably correct; but his views won’t change the genuine concerns that people have about food security in the decades ahead. Blas’ article was written prior to World Summit on Food Security held last November in Rome. At that summit, world leaders “unanimously adopted a declaration pledging renewed commitment to eradicate hunger from the face of the earth sustainably and at the earliest date” [World Summit on Food Security, Food and Agriculture Organization of the United Nations].
Of course it’s easy to adopt declarations, make pledges, and speak out. Following through on all the rhetoric, by keeping commitments and making progress, is much more difficult to do. Although one can find hungry people in every country in the world, the one billion chronically-hungry people of the world are mostly found in developing countries. As the FAO web site asserts, “Poor countries need the development, economic and policy tools required to boost their agricultural production and productivity. Investment in agriculture must be increased because for the majority of poor countries a healthy agricultural sector is essential to overcome hunger and poverty and is a pre-requisite for overall economic growth. The gravity of the current food crisis is the result of 20 years of under-investment in agriculture and neglect of the sector. Directly or indirectly, agriculture provides the livelihood for 70 percent of the world’s poor.” Since most of these countries remain agrarian, exporting some food products is essential to help them develop a sustainable economy; hence, the concern about the movement towards self-sufficiency. Blas continues:
“Countries in Asia, Africa and the Middle East have moved towards self-sufficiency in response to the crisis, either by boosting agricultural production at home through subsidies and import tariffs or acquiring overseas farmland. The so-called ‘farmland grabs’ gained notoriety after an attempt by South Korea’s Daewoo Logistics to secure a huge chunk of farmland in Madagascar, which contributed to the collapse of the African country’s government. Paul Conway, senior vice-president at Cargill, said: ‘Promoting a free and open trading system whereby countries can produce what they are best able … and surpluses can be traded across international boundaries is the right way to go. Not all countries can single-handedly be self-sufficient in all food commodities.'”
For more information about the so-called “farmland grabs,” read my posts entitled Food and Water Shortages in the Middle East, Buying the Farm and An Update on Buying the Farm. In the first of those posts, I noted that the strategy of buying farmland in other countries with the expectation of having that food available in times of crisis is risky. Cargill’s Conway agrees. Blas continues:
“Mr Conway warned that host countries were likely to impose export bans in the event of a local or global food crisis. In a rare interview, he said food security had become a key global challenge. ‘It is a high, high political item,’ said Mr Conway, who is in charge of Cargill’s food security initiatives. ‘Food security, which was not on the agenda of anyone but agriculture ministries only three years ago, is now very central to governments,’ he said, noting that the interest was at its highest level since late 1970s or early 1980s. … Archer Daniel Midlands, Bunge, Cargill and Louis Dreyfus – the world’s top food trading houses – are at the center of agricultural trade and their wide business and government relationships allow them to see changes in food policy. ‘The whole world had got very relaxed about food security and, yes, probably unduly complacent,’ Mr Conway said. He warned that rising populations and wealth in developing countries and governments’ targets for biofuel production were likely to continue to put upward pressure on food prices for years to come. Mr Conway said the world’s food security would be improved if countries reached a deal on the Doha trade round.”
As an executive of the world’s largest trader of agricultural commodities, one would naturally expect Conway to be a proponent of a robust global agricultural trade. Even though his point of view may be biased, his arguments are sound. Global food security cannot be achieved without a robust global agricultural trade. If the FAO is correct, that trade will be a good one to be involved in over the next 40 years. “The Food and Agriculture Organisation forecasts that global trade of food staples will surge to 300m tonnes by 2050, up from the current 135m tonnes.” Cargill executives are not the only individuals sounding a warning about the rhetoric and realities of self-sufficiency. In another Financial Times‘ article, Gideon Rachman discusses some of the negative policies that can arise when self-sufficiency becomes national policy [“When nations turn into hoarders,” 26 January 2010]. He begins by discussing the current global state of affairs:
“During the second world war, Britain’s food supplies were threatened by German U-boats and the government responded with posters, urging the public to ‘dig for victory’, by growing vegetables. You might assume that such concerns were consigned to history. But apparently not. The issue of national food security is back on the agenda. Earlier this month, Hilary Benn, Britain’s minister for food and rural affairs, gave a speech in which he argued that ‘the truth is now apparent … We cannot take food security for granted any more. Food security is as important to this country’s well-being as energy security’. With energy, even more than with food, the British are beginning to question their reliance on purchasing supplies on the open, world markets. This month, supplies of natural gas ran so low that almost 100 large industrial users were temporarily cut off. This is no mere national eccentricity. On the contrary, the fact that even the free-trading British are worrying about food and energy supplies is indicative of a much broader global trend. Across the world, the major powers are moving to secure access to energy, food and, in some cases, water. Faith in a trade-based system of globalization – in which nations can always buy what they need on the open, world markets – is giving ground to an effort by individual nations to secure supplies. Like survivalists, hoarding tinned food in the basement, individual nations are preparing for the worst. Chinese state-owned oil companies are engaging in ferocious bidding wars with western energy companies as they go after access to the same oil and gas fields, particularly in Africa. The pursuit of ‘energy independence’ has become a bipartisan dream in the US, leading to a big increase in the production of biofuels made from grain which, perversely, has helped to tighten food prices. Middle Eastern investors, in particular the Saudis and the Gulf Arabs, have been leasing huge tracts of land in Africa, in an effort to grow food that is reserved for their own nations. In Europe, supporters of the protectionist Common Agricultural Policy are freshly emboldened. This new global paranoia about food and energy security is driven by four factors: economics, demography, the environment and geopolitics.”
I’ve discussed all of those factors in past posts. The fact remains that money is moving east, the global population continues to grow, climate change will destroy some agricultural sectors, and, as Rachman notes, the global supply chain could be disrupted. On this later point, he writes:
“Worrying about sea lanes in the age of the internet sounds anachronistic. But the globalized trading system still relies on moving huge amounts of food and energy around the world by ship – and there are at least three choke-points that look vulnerable to disruption. The one that is getting all the attention at the moment is the Gulf of Aden, just south of the Suez canal, where a large multinational flotilla is fighting the threat from Somali pirates. The Strait of Hormuz, through which most Gulf oil needs to pass, could easily be blocked in the event of a conflict with Iran. Meanwhile, the Chinese government has fretted publicly about its ‘Malacca dilemma’ – the fact that most of China’s imported oil from the Middle East has to pass through the Malacca strait, a narrow waterway between Indonesia and Malaysia. China is uncomfortably aware that it is ultimately reliant on the American navy to keep these vital sea lanes open – a fact that may be driving the Chinese effort to build up its own navy.”
Rachman is a bit too dismissive about rising concerns over economics, demography, the environment, and geopolitics, claiming that “most of these concerns will probably turn out to be excessive and paranoid.” He believes the real concerns can be found in political overreaction. He explains:
“The trouble with energy and food scares is that they risk creating a self-fulfilling prophecy. If countries embrace protectionist food policies, then destabilizing price surges are more likely. Aggressive action by one major power to secure energy supplies is liable to set off alarm bells elsewhere. What is ultimately at risk is the system of globalized trade and open markets that the world has got used to over the last 30 years. That is an idea for world leaders to chew over.”
I agree with Rachman that a return to protectionist policies could be devastating for a global economy that is just starting to pick itself up from its knees. There is a saner middle ground between full-on globalization and outright hoarding; and I suspect it will alleviate many of the current concerns. That middle ground will be an increase of regionalization within globalization. Such a course makes sense because it shortens supply lines (and transportation costs), encourages better relations between neighbors, fosters sensible economic clusters, yet maintains the connectivity necessary for the global economy expand. Of course, not everything can be regionalized. There are some products and natural resources that will continue move globally — oil being one of them. Food, however, is one of the sectors that will likely see an increase in regionalization. There will continue to be seasonal global shipments of food because consumers in wealthy countries will continue to insist on variety year around; but, since regional tastes in food vary, it makes sense that foods enjoyed by regional populations be grown closer to where they are consumed. What need to be avoided are protectionist policies that could disrupt current or emerging trading patterns. Such policies create lose-lose situations at a time when win-win scenarios are desperately needed.