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| | Rome Meetings: Momagri Brings New Strategic Vision for Global Agriculture |
Following the FAO's High-Level Conference on Food Security, a momagri delegation traveled to Rome to present the first results of its economic model, along with its proposals for international cooperation on agriculture.1.
We met with a number of officials from the FAO, IFAD and the Permanent Representative of France to the Food and Agriculture Organization of the United Nations. Our conversations were all the more interesting in that our efforts provide responses to current questions:
› Will agriculture prices continue to rise, in the manner of energy raw materials, for example?
› What effect does speculation have on agricultural prices?
› What agricultural policies should be implemented in the context of severe price volatility?
› How should agricultural trade be organized at the international level, while still preserving free trade?
These questions demonstrate a new awareness of the risks that unregulated free trade brings for agriculture. An increasing number of people are concerned about certain developments, such as the financialization of global agriculture. And yet today, liberalizing agricultural trade still remains the only institutional response to the effects of rising agricultural prices.
It is momagri's mission to offer a new political vision enabling all the world's farmers to live off agriculture, a vision that garnered broad support among the international organizations in Rome.
That is why we presented the results of our work to them – work that, as some of those we met with pointed out, represents an alternative in a world in which economic thinking has been described as "monochromatic" (Marcela Villareal, Director of the Gender, Equity and Rural Employment Division - ESW).
The most notable figures with whom we met were:
› H.E. Madam Mireille Guigaz, Ambassador/Permanent Representative of France to the United Nations in Rome, and Jean-Jacques Soula, her scientific advisor;
›Hervé Lejeune, FAO Assistant Director-General/Directeur de Cabinet;
›Hafez Ghanem, FAO Assistant Director-General of the Economic and Social Department, along with economists from his team and several directors from the institution;
›Roberto Longo, IFAD Policy Coordinator, along with the economists and consultants from the IFAD Policy Division.
The content of our meetings can be summarized in three parts:
1) The momagri model: Innovation and utility
Contrary to the agricultural price forecasts accepted by many economists, our model indicates that the complete liberalization of agricultural trade will bring severe price volatility for cereals and plummeting meat prices.
We explained why there are such differences between our simulations and the FAO’s simulations obtained using the OECD's AGLINK model. These differences are due to the fact that our model integrates the unique characteristics of agriculture. The officials understood this point, and praised our conceptual approach as very useful for improved policy evaluation.
In response to Hervé Lejeune's questions about the lessons to be drawn from our simulations, we stressed the fact that the "evaluation errors" of the traditional models could "destroy" the agricultural development programs so strategic for the future of those living in the poorest countries.
Indeed, following the severe crisis consumers have just experienced due to the spike in agricultural prices, developing countries may face a second crisis, which will be just as devastating for their socioeconomic balance. Likely drops in agricultural prices will have a serious impact on farmers, who will have increased production in response to "overly optimistic" price forecasts. Moreover, in the unregulated liberalization processes underway, no mechanism will have been established to "save" farmers from such price variations.
Responding to questions from Hafez Ghanem and his team, we then gave a detailed description of the innovations on which our economic simulation model is based, particularly the modeling of risk-based price volatility. Indeed, prices do not fluctuate solely as a result of exogenous factors (such as the vagaries of weather), but also as a result of endogenous factors such as forecasts by farmers and speculation.
This also gave us the opportunity to explain why the classic models produce linear forecasts for agricultural prices, which do not reflect reality.
Beyond the fact that our work "happens to fall" at the right time, the FAO and IFAD officials were also surprised by the originality and quality of our model.
Our meetings also confirmed the concern among political leaders regarding the economic, social and geopolitical consequences of speculation on agricultural raw materials. We reiterated to the FAO and IFAD that this is a priority issue for us, as demonstrated by our integration of speculation into our simulation model. We also presented one of the indicators that we have just developed, which signals that speculation will further accentuate global price variability.
As opposed to those who believe that price volatility is uncontrollable, momagri is calling for simple yet ambitious mechanisms to prevent agriculture from replacing oil as the next source of geopolitical tensions.
As momagri Executive Director Jacques Carles noted, the extreme volatility of agricultural prices is a destabilizing factor just like the hyperinflation of the 1970s, which all of the world’s governments, through their central banks, were able to “tame.”
We are currently facing a similar problem, and if we want to save free trade, then we must anticipate changes and implement the necessary regulations.
We are beginning to see a consensus on this argument, not only within international organizations, but also in the most unexpected places; senators in the U.S. Congress, for example, are currently considering mechanisms to "reduce the role speculators play" on the prices of energy raw materials.
In any case, the FAO and IFAD officials invited to our presentation clearly showed an interest in our approach, one that is innovative, realistic and, as Ezzedine Boutrif, Director of the FAO's Nutrition and Consumer Protection Division (AGN), noted, "integrates the human element."
Let us hope that the world won't wait for a new wave of hunger riots to begin establishing the necessary regulations.
2) General doubts over the benefits of liberalization
Those we met all mentioned their concerns with regard to certain developments in global agriculture that cannot be solved with free trade.
In particular, we appreciated Hervé Lejeune's analysis, according to which the creation of a "medieval sharecropping system" at the global level could throw developing countries into a dangerous situation of dependency.
The financialization of agriculture and the dangers of this phenomenon are now recognized. Unfortunately, the "blind application" of a policy of liberalization, unaccompanied by any reliable evaluation tool, prevents any debate to remedy these problems.
The FAO and IFAD experts mentioned several critical elements for the future:
› Developing countries have lost all faith in the global market;
› Land ownership and broader property rights issues can undermine the effectiveness of agricultural development programs;
› Seventy percent of rural households in the poorest countries are net purchasers of food products, proving the collapse of subsistence agriculture;
› Are there no indicators today that make it possible to measure the impact of the correlation between agricultural and oil prices?
Hafez Ghanem even recognized that the question of the "winners and losers of free trade" has yet to be answered. This comment evokes the increasingly widespread questions about the overall benefits of liberalizing world agricultural markets.
Taking one step further toward calling into question a free trade model that disregards social and environmental balances, H.E. Mireille Guigaz described as "romantic" the studies that conclude that domestic agricultural production in developing countries can, alone, ensure supply in those countries. Indeed, it would be illusory to believe that the development of "urban gardens" on the outskirts of megalopoli in developing countries is the only long-term solution to the problem of hunger. We need to have a more realistic policy and not forget the planet’s main temperate zones.
This was in fact the theme of a speech given by Franz Fischler, former European Commissioner for Agriculture and current President of the RISE Foundation (Rural Investment Support for Europe), at the June 18-20 AgriBusiness Forum held at the FAO.
In the end, the problem is, yet again, one of evaluation: political considerations aside, could global supply tomorrow become concentrated in the few geographic regions that enjoy comparative advantages in terms of available land and low social costs, such as Brazil? This analysis must be carried out, because the complete liberalization of agricultural trade is, quite certainly, driving us to that point.
3) The officials we met with were very interested in the three levels of momagri's work (the model, proposals for governance principles and the rating agency).
Hafez Ghanem, his team at the FAO and the IFAD Policy Division economists all expressed their desire to be informed of the next simulations of the momagri economic model, particularly with regard to extending the simulations to 10 geographic regions.
We also discussed possible collaboration based on clear complementarity, particularly in the area of poverty. Indeed, unlike the models used by the major international organizations, our approach, which distinguishes between four types of households (poor urban, wealthy urban, poor rural and wealthy rural), provides answers to questions regarding the effects of free trade.
We hope that our proposals for governance principles will allow political leaders to move beyond observations, taking on the necessary task of defining the regulatory mechanisms that are becoming more and more urgent each day.
With regard to our plan for a rating agency, everyone recognized the need for bona fide evaluations, particularly of agricultural policies. With the "power of information" that it would create, such an agency would make it possible to attract government and institutional key players to the agricultural policy that we are advocating.
H.E. Mireille Guigaz, who asked about the feasibility of the governance principles, stressed the need for such an agency, which would serve as a tool for stimulation and increased transparency.
The next visit to Rome has been planned for early December. We will discuss the possibility of partnerships with the FAO and IFAD, based on the latest developments of the momagri model and factors that we will by then have established, pertaining to the launch of the rating agency. We are also planning on making presentations to FAO members, with the support of the Permanent Representative.
Just as we have seen on our various trips, momagri's approach responds to real needs. This is even truer in light of the conviction held among top political leaders for some years that agriculture has become an economic sector like all the rest. Let us hope that casting doubt on this belief will enable those leaders to establish agricultural policies that will quickly grant a future to all of the world's farmers.
Dominique Lasserre, Expert of momagri
| 1 Members of the delegation
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Advocating for
agricultural market
regulation and global
food governance | |
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