By Michel Fosseprez,
President of inVivo, Union of Agricultural Cooperatives
Founding member of the World Organization for Agriculture (WOAgri),
Michel Fosseprez spoke in his capacity as founding member of WOAgri at the IRIS conference organized on 13th December 2006 entitled “Which agriculture for Europe”? He gave an informative analysis for future international negotiations on agricultural issues, stigmatizing the imperfection of current agricultural models and highlighting the importance of obtaining real tools for decision-making to create international cooperation around the strategic importance of agriculture.
This is his unabridged speech.
The Doha context
First we must remember that the Doha Round negotiations are carried out within a specific context, that of the recent entry of agriculture into international negotiations. We must also be aware that the Doha Round, as it is today, is somewhat different from what it was initially. In Doha, and in all international negotiations, there are opposing camps. On the one side there are the Americans who generally speaking have high agricultural ambitions, use tools that are extremely efficient and responsive but difficult to decipher. On the other, there is Europe, easily decipherable, frequently criticized, but which still has some support. Europe is the largest exporter but is nevertheless far from being independent, in terms of proteins for example. Developing countries are also involved in the negotiations, including Asia – economic development there is considerable but farmers are somewhat left out. And finally, there are countries, including African countries, where there is neither economic nor agricultural development. Farmers sometimes even live in poverty.
The Doha Round began in the context of an extension of these negotiations, at a time when world prices were fairly low. The main issue was of course to criticize the States or continents that assisted their farmers, and more globally to denounce subsidies. For some months now, we have been seeing a decline in world stocks. Currently for export sales in France, InVivo is practically the largest exporter. We are selling to India and Black Africa. We have contacts in countries such as Algeria, which is looking for partners. Importing countries have experienced an explosion in world prices and have to consider the consequences that this could have on their own stability. They need to feed their people. World prices have increased considerably from year to year, by about 65%. Some liberal countries prevent their farmers from exporting and benefiting from this price rise, for example Brazil or even Australia, which it seems could limit its exports to some extent because of drought.
A liberal country should logically be liberal right to the end, allowing its farmers to export, especially in situations where poor countries continue to suffer from hunger and where developing countries see their agriculture excluded from the development process. In total, a billion people live on less than one dollar a day. The United Nations program for development estimates that today 900 million people are becoming poorer compared to the goals that have been set and that 500 million people suffer from hunger, particularly in Sub-Saharan Africa, South-east Asia and East Asia, where the situation is getting worse. And finally, 2.6 billion people on earth live without water, both in shantytowns and in rural areas. We cannot say that this is a brilliant result.
How have we got to this?
After twenty years of negotiations on agricultural issues, we are still witnessing immense ignorance of the specificities of agriculture. Specificities that we must clarify.
The first point we must emphasize is the length of the production cycle. Let’s say that when we sow a grain of wheat today, we cannot know what the state of the market or what the balance between supply and demand will be one and a half years later.
The second point is structural: in agriculture we work in a world of living organisms. And the world of living organisms has its hazards, particularly climatic hazards. We cannot therefore logically organize solid correlation between supply and demand.
The third point, which has always been ignored by the models, is that there is no elasticity of demand when there is an evolution in purchasing power. In other words, if the purchasing power increases in developed countries, this does not mean that people will eat twice as much. Although a certain amount of data is generally valid in the economic register, it is not valid for the agricultural sector, because of its specificities.
Agriculture is also an industry that is highly capitalistic and not delocalizable. We can delocalize naval construction factories or textile factories, but not always cotton production!
We must be extremely careful when referring to agriculture. And aware of this fundamental question: how can a farmer carry out his work successfully, when he is incapable of predicting the selling price of his crops in twelve, eighteen or twenty-four months time? Other unknown entities can be added to this: the quantity and quality of the crops. Will the barley seed that has been sown contain ten or twelve proteins? With twelve, the harvest is used for forage crops: here we are talking about specificities, inherent to a farmer’s job, and which will not change in the future. Once these elements are understood, we can ask ourselves: how and why has a sudden explosion of world prices occurred? We the exporters have been warning people to some extent since 1998, saying that one day an imbalance will occur. We could blame our politicians but, more seriously, we must be aware that most economic models they used to make their decisions were not reliable, for a certain number of reasons. The World Bank models, the FAPRI (Food and Agricultural Policy Research Institute) or the OECD models were based on liberalization, believing that inherent development would surely follow. Figures were even given, because only a year ago, it was announced that there would be a potential welfare gain of 340 billion dollars for the whole of the agricultural sector. A few months later, this figure fell to 25 billion, which is very low compared to the GDP of the planet.
Why were these models totally wrong?
They simply did not take into account the structural phenomena related to agriculture (such as the non-elasticity of demand compared to prices) and they considered the agricultural sector as completely independent from its environment. This of course is not true. Examples of this are the cost of transport and the current problems of freight in Europe (problems in Hungarian maize exports). Environmental constraints were not taken into account in these models, whether it concerned protection of the environment or plant health. And finally, exchange rates were not taken into consideration. To this was added the fact that agriculture is by no means delocalizable. All these models are constructed around a representative consumer: but does this really exist in our world? The answer of course is no. Because the respective needs of Asia, Africa and our developed countries are not at all similar. The distinction between rich and poor was not established and unemployment was not taken into account. A certain number of macro-economic elements outside agriculture should incite us to reflect on this.
Within WOAgri, without being conservative or protectionist, we work on the assumption that the specificities of the agricultural sector need a minimum of regulations. Our objective is to develop on an international level. We have in fact already met some African public figures and we plan to go the United States in the spring. The organization’s mission is to expand and try to build a model that takes into account these “forgotten” effects mentioned before. With the conviction that political decisions will be more rational if they are based on fair foundations.
Source : www.iris-france.org