International agricultural trade rules and global challenges facing Europe

1. International agricultural trade rules and global challenges facing Europe Niek Koning Farm policy analyst (emeritus Wageningen University)

2. A bit of history:John Maynard Keynes & global commodity markets • In 1928, globaloversupplyslashedthebuying power of commodity exportingcountriescausing exports of industrialcountriestoplummet • The ensuingdownwardspiralentailedthe Great Depression Nazi takeover in Germany  World War II • Keynes mastermindedthe 1944 Bretton Woods Conference thatlaidthe foundations forthepostwarinternationaleconomic order • His leadingidea: market economy is unstableandshouldbestabilizedtoprevent new disasters • His blueprint included a buffer stock system forstabilizinginternational commodity markets

3. Andtoday? Commodity market instabilitystill has disruptiveeffects

4. Andtoday? Commodity market instabilitystill has disruptiveeffects Besides, we are facedwith new agricultural-trade-relatedglobalchallenges: • Populationbomb in Africa • Climate change • Risk of increasedglobal food scarcity

5. Andtoday? Commodity market instabilitystill has disruptiveeffects Besides, we are facedwith new agricultural-trade-relatedglobalchallenges: • Populationbomb in Africa • Climate change • Risk of increasedglobal food scarcity Ad 1: Populationbomb in Africa • UN medium scenario: Africanpopulationfrom 1.2 to 4.4 billionby 2100 • May causeuncontrollablemigration • Onlypro-pooreconomicgrowthcandefusethistime bomb • Involveseffective incentives forhouseholdstoreducetheiroffspring • Pro-poorgrowthrequiresgovernment support forsmallholderinnovation • Agricultural development is needed as a starting motor but is hamperedby market failures • It requiresa policy U-turn in Africa, but alsostabilization of internationalcommodity marketsandanunalienableright forpoorcountriestoprotecttheir farmers • Poorcountriescan’tuse direct payments, only input subsidies and import tariffs

6. Andtoday? Commodity market instabilitystill has disruptiveeffects Besides, we are facedwith new agricultural-trade-relatedglobalchallenges: • Populationbomb in Africa • Climate change • Risk of increasedglobal food scarcity Ad 2: Climate change • Better farm practices (including practices that restore soil carbon) can reduce agriculture’s net emission of greenhouse gases as well as raise crop yields • International traderulesshouldallowcountriestofavoursuchpractices • Right to keep domesticprices at a level where farmers canuseclimate-friendlymethods • Right torequirethatimported farm products are climate-friendlyproduced • N.B.: Greenhouse gas emissions have global, notjustdomesticenvironmentaleffects. (Sowhyshould we beobligedto import commoditiesproducedin waysthathurtus?)

7. Andtoday? Commodity market instabilitystill has disruptiveeffects Besides, we are facedwith new agricultural-trade-relatedglobalchallenges: • Populationbomb in Africa • Climate change • Risk of increasedglobal food scarcity Ad 3: Possibleincrease in global food scarcity • ‘Industrial Revolution’ was a Fossil Fuel Revolution • Substitution of fossil for living biomass in energy & materials • Increase in global farm output through fertilizer and motorized transport / irrigation • This Fossil Fuel Revolution is now gradually being exhausted, while the rise of new middle classes & poverty-driven population growth continue raising global demand • Reverse substitution, increased scarcity of land & water, much harder to raise yield potential of crops • Gap filling is notenough! Preventingscarcityrequiresinnovationsthatallowquantumleaps in living biomassproductionand make energy & materials carbon-independent • Apart from public investment in research, thisrequiresstabilization of international commodity & energy marketstoreduce investment risk

8. Andtoday? Commodity market instabilitystill has disruptiveeffects Besides, we are facedwith new agricultural-trade-relatedglobalchallenges: • Populationbomb in Africa • Climate change • Risk of increased global food scarcity In itself, a gradualincreasein global food pricesmightnotbedisastrous… …but whatifcontinuingpoverty, soaringpopulationgrowthandclimatewill have turnedAfricainto a powder keg… …andthe trend change in food marketsinteractswitha cyclic pricefluctuationtocreate extreme rises in food pricesthatcausesthekeg toexplode?

9. Inplicationsforinternationaltraderules • International commodity marketsshouldbestabilized • International buffer stocks (à la Keynes), supplementedbytradequotas (minimum import & maximum export) andflexiblebiofuel mandates toprevent buffer stock overflowing • Countriesshouldbeallowedtostabilizeand support theirdomesticagriculturalprices • Poorcountriesshould have anUNALIENABLE right toprotecttheir farmers • Dumping of surplusesandcrowding-out of importsshouldbepreventedbymultilaterallyagreedtradequotas, notbyrestrictingdomesticpricepolicies • Countriesshouldbeallowedtorequirethatimported farm products are produced in a climate-friendly way

10. Thus far, debates on CAP reform andinternationalagriculturaltraderules have been dominatedbymercantilist export desiresandtug-of-war between European regions… …Isn’tit time togive more weighttothe real globalchallengesfacing Europe? N.B.: A multilateralframeworkthatallows Europe torehabilitateagriculturalprice policy as thegeneralfarm income policy instrument support wouldalso help Europe topurifyitsinternalregional politics (byeconomizing on direct paymentsandusingthemforlessfavouredareasand real agro-environmental services only)

11. Thanks! For elaborationsee: