A new vision for agriculture
momagri, movement for a world agricultural organization, is a think tank chaired by Christian Pèes.
It brings together, managers from the agricultural world and important people from external perspectives,
such as health, development, strategy and defense. Its objective is to promote regulation
of agricultural markets by creating new evaluation tools, such as economic models and indicators,
and by drawing up proposals for an agricultural and international food policy.

From Sydney to Brisbane, still a long road ahead for the global economy

Thierry Pouch, Permanent Assembly of the Chambers of Agriculture (APCA)

Sluggish European growth, weakening of emerging economies… The global economy is still far from regaining its confidence. While the G20 advocates innovation, as writes Thierry Pouch in an article that we are publishing below1, and while a consensus on the need to strengthen global governance is emerging, it is clear that the tensions between emergent and industrialized countries are tangible. Over time, nothing else but a new “currency war” might occur.

This concerns agriculture first and foremost. The impact of exchange rates on agricultural competitiveness has been heightened during these past few years, due to the indebtedness of farmers and governments, and to the liberalization of agricultural trade and its growing financialization. Exchange rates then seem to be a crucial variable of the agricultural competitiveness.

Yet, taking into account the impact of currency and exchange instability on agriculture can only be valuable once new governance models are implemented, an issue that must be jointly dealt with by international organizations, especially in the framework of the G20.

momagri Editorial Board

The G20 must represent something tangible. Indeed, at the height of the Eurozone crisis, France had assumed its presidency. In 2014, the G20 under Australian presidency will surely be in the news, since the issue of innovation has already been raised. Innovation especially lies in the request addressed to heads of states and governments to work together to strengthen economic growth. And with good reasons, as it has been idling for the past few months, and tensions between industrialized and emerging nations are deepening.

Meeting in Sydney on February 22 and 23, 2014, the ministers of finance, the governors of central banks and the IMF Director-General obviously did innovate.

In the past, the G20 meetings led to a listing of recommendations that were included in the final communiqué signed by heads of states and governments at year’s end. At the height of the economic turmoil, these recommendations were more in line with economic restraint, in order to ease the pressure linked to budget deficits and the abysmal debt of nations. Implementing these recommendations resulted in a situation where the Eurozone economies are now close to deflation. Even though the growth figures for the 2013 fourth quarter are better than expected, the fact remains that the Eurozone is far from being on the road to economic growth.

In addition, what sets apart the current economic situation from the one we underwent between 2008 and 2010 concerns the deterioration of emerging economies. Just as they coped with the economic and financial crisis generated by the burst of the real estate bubble, their downturn now worries the IMF as well as the G20. That is the reason why the latter is innovating. The Australian presidency of the G20 asked member states to provide, by next November, quantified commitments towards revitalizing global economic growth. The objective set by Australia and endorsed by the IMF is to achieve an increase of 4 percent in 2014, 3.75 percent in 2015, both rates that are higher than the 2013 trend.

Nevertheless, the G20 nations are moving in a scattered manner. On one side, the Americans, together with the Australians, feel that emerging economies must prepare for giving up liquid assets, the result of a very expansionist monetary policy conducted for close to three years by the U.S. Fed. Janet Yellen, who replaced Ben Bernanke, indicated she wants to relax the measures set by her predecessor (Quantitative Easing). On the other hand, the key emerging countries are asked to initiate productive investments and develop productivity gains. China, Brazil––which is quite far from recession––Turkey, Argentina, India––where the downturn is more severe than elsewhere––as well as Russia and of course Ukraine are actually affected by this economic slowdown.

For Australia, restoring global growth would avoid two pitfalls. The first one involves the fact that declining growth in emerging countries impacts global trade and at the same time contracts business. The second pitfall concerns the monetary order.

With fewer monetary assets and weakened economic growth, investors have a strong incentive to shun these nations and look for more attractive yields, especially in the United States whose growth is rebounding, and more surprisingly in the Eurozone. The currency alignments of these emerging nations are bearing the consequences. For close to a year, most of them have fallen. This is an opportunity for emerging nations to stimulate growth through exports… at the expense of the Eurozone whose currency continues to appreciate. And what do you feel will happen? Quite simply, new currency tensions between industrialized and emerging nations, with some observers even talking about a “currency war”. As the Governor of the Indian Central Bank himself admits it, the whole international currency cooperation has been frozen for a year.

Such an index lets us recognize the continuing difficulties facing the global economy, and the lack of global monetary governance, a void that dates back to he 1970s. Will the G20 countries meet the challenge? We shall see in Brisbane next November. By then, many things can still happen and generate positive, as well as clearly not so positive surprises…

1 The full article is available from here (in french) http://www.chambres-agriculture.fr/fileadmin/user_upload/thematiques/Economie/LetEco1403.pdf
Page Header
Paris, 17 June 2019