In a speech given on April 2 entitled “A Challenge of Economic Statecraft”, World Bank President Robert Zoellick stressed the need to implement a “New Deal for Global Food Policy” on a world scale. His words were chosen in a context marked by increasing social unrest in many developing countries resulting rising food prices for staples such as rice and wheat. Believing it likely that food prices will stay high while remaining volatile, he argued in favor of a “new deal”, in which the World Bank could play an active role, and outlined a series of measures to support agriculture in developing countries.
Although a parallel can be drawn between the policy of the same name carried out by the American president F.D. Roosevelt in the1930s, the size and scope of the actions proposed are not comparable. Consequently, and following the series of changes initiated at the end of 2006 by the World Bank audit,1 followed in 2007 by that of the FAO2, and the conclusions of the 2008 World Development Report3is Robert Zoellick’s statement the first stone in building a structure that has today become indispensable — that of veritable governance for world agricultural markets?
That is the argument momagri has been presenting since its creation in December 2005. Since then, we have long supported it through our work and, in particular, the establishment of the momagri economic model that was a priority goal and that began to produce its first results in March 2008.
First, we will analyze the terms of Robert Zoellick’s observation. We will then develop the momagri proposals that go beyond this observation, because they seek to organize the “missing” world governance for agriculture and development.
I- A “New Deal for Global Food Policy” that goes beyond agriculture
The many measures announced in this New Deal for Global Food Policy cover a large range of agricultural issues: food security, countries’ independence and sovereignty, development, fighting hunger and poverty, etc. The New Deal envisioned therefore goes well beyond the traditional concept of agriculture as the economic sector responsible for the production of food goods, because it embraces both the strategic dimensions of development and their consequences in terms of economic policies.
A strategic New Deal
For Robert Zoellick, the increase in food crises and their direct effects on the security and independence of states are the two primary reasons that push for the establishment of a strategic New Deal for agriculture. In fact, resulting from the spike in prices of agricultural raw materials, the food crises brewing in many developing countries increase the number of “food riots threatening social breakdown” and force children to “flee the security of their rural communities to fight for food in teeming cities.” This is even more the case since agriculture on average accounts for 70 percent of GDP in the Least Developed Countries. It is therefore urgent that we act, because, aside from the implications in terms of food independence and security, it is the economic and political stability of developing countries and the Least Developed Countries that are at stake. The president of World Bank therefore points out that 33 countries currently “face potential social unrest because of the acute hike in food and energy prices.” Therefore, in his opinion, this strategic New Deal must take the form of a mobilization of all the stakeholders — states and international institutions in the lead, but also the private sector and agricultural research institutes. The establishment of new cooperation ties is therefore paramount, as it is true that “food policy needs to gain the attention of the highest political levels, because no one country or group can meet these interconnected challenges.”
A New Deal for reaching the Millennium Development Goals (MDGs)
Although Robert Zoellick is advocating a New Deal for Global Food Policy from a strategic angle, he also considers it in terms of reaching the Millennium Development Goals (MDGs),4 the achievement of which is becoming increasingly hypothetical. From this perspective, the measures proposed by the president of the World Bank are as much linked to the present economic climate as they are structural. Regarding the measures linked to the economic climate, he believes that the first thing to be done is to increase the financial capacities of the United Nations World Food Programme (WFP), which shows a deficit of at least 500 million dollars. According to him, the risk of seeing increasing famine can only be diminished if the OECD countries, and in particular the United States, the European Union and Japan, increase their financial contributions to the WFP. Likewise, this call for the implementation of a New Deal for Global Food Policy on a world scale also includes the announcement that the World Bank will increase its agricultural loans from 450 million dollars to 800 million dollars for Africa alone. But that is not all. Regarding the structural measures, Robert Zoellick argues for a deep reform of the existing food aid system in favor of “a broader concept of food and nutrition assistance”. It is an ambitious goal which could be achieved in particular by providing cash or vouchers as opposed to commodity support. This would assist in building local food markets, increasing farm production and reducing poverty—one of the first Millennium Development Goals.
A New Deal for economic and trade policy
The final aspect of the New Deal for Global Food Policy relates to the changes that need to be made by international institutions in terms of economic and trade policy. Two aspects in particular are put forward, and they demonstrate that after years of believing that the instability of agricultural markets was due primarily to demand, the majority of disturbances are in reality generated by supply, so much so that regulation is necessary. The first element goes back to the importance of managing the many risks to which the different market players are vulnerable, producers in particular. From this perspective, Robert Zoellick announced that the World Bank could help “countries and farmers manage systematic risks, including through financial innovations to counter weather variability, such as drought”. The second aspect involves the need to maintain a fabric of rural production and to promote its development through improving productivity. That is the reasoning behind World Bank’s commitment in favor of a “Green Revolution” in Sub-Saharan Africa but also of the production and marketing of agricultural products in a development perspective.
Due to its world scope and the extent of its actions, this New Deal for Global Food Policy is at odds with the prevailing strategy of the day. Aware of the need for an equally quick and profound change in direction, the president of the World Bank is in reality proposing an “electroshock” to international agricultural cooperation, just as in his time American President F.D. Roosevelt undertook on a national level for the agricultural sector in the 1930s. However, behind this New Deal for Global Food Policy, is there not a desire to initiate the construction of a structure that is lacking today but indispensable for dealing with the issues the international community faces in the 21st century in the domain of agriculture — the implementation of a bona fide global agricultural governance?
II- More than a New Deal, a call for the implementation of world agricultural governance
The food tensions we are currently observing and the increasing concerns that they cause reveal the inability of international institutions to meet all the challenges inherent to agriculture. Consequently, the change in direction proposed by Robert Zoellick underlines the absolute need for world agricultural governance and, therefore, for an appropriate strategy and analysis tools.
An Observation: the inability of international institutions to meet the challenges inherent to agriculture
On the international level, there is no world governance for agriculture. The WTO, by mandate, only deals with international agricultural trade, which represent only 10 percent of world agricultural production. As for the FAO, it intervenes further down the line, primarily coming into play in agriculture when there are problems regarding access to food commodities, and it is positioned more as a reflective body than a decision making body for agricultural and food issues. Environmental and development issues are addressed by different UN programs (UNEP and UNDP), further accentuating the phenomenon of fragmented responsibility in terms of agriculture and food issues among the various international institutions and the difficulties that exist for coordinating all of the strategies being carried out.
What is more, however useful they may be, these international institutions do not address the agricultural issues of the 21st century. They were all created to deal with post-war issues following World War II — a period in which the gradual opening of markets was seen as a good way to maintain peace and maximize food supply for countries. The world has evolved since then and agriculture has abandoned its simple role of meeting food needs for the more strategic role of guaranteeing balances in the world, whether in terms of food, energy, the economy, the environment or society. Recent audits performed within World Bank and the FAO attest to the fact that the goals being pursued and the strategies implemented to reach them do not match. In fact, international institutions are suffering from a true lack of confidence and they seem unable to stand up to the major challenges of our times such as the fight against hunger and poverty and development in the Least Developed Countries.
In this context, the need to rethink the goals and renew the action strategies in the domain of agriculture is becoming increasingly urgent.
It seems that only a sudden, profound change in the course of the current strategy, which thereby reveals the need for world agricultural governance, would be effective, exactly as F.D. Roosevelt did in his time in the United States. Although the proposals advanced and the scope of action envisioned by Robert Zoellick differ from the New Deal implemented by F.D. Roosevelt, the arguments behind such an “electroshock” are similar: the sudden realization of the failure of the policies carried out and the maladjustment of the institutions charged with promoting them. The parallel with the New Deal put in place by F.D. Roosevelt is even more interesting because it illustrates the validity of Robert Zoellick’s approach as well as the success one can hope for. There are in fact historical similarities between the two contexts. Among the first of these we can cite the appearance of tension on the agricultural markets that they were not able to curb alone, the collapse of financial markets and the unexpected arrival of systematic risks that affected the economy as a whole. We remind you here, moreover, that the strategy implemented by the American president at the time was extremely effective in terms of the goals pursued.
World agricultural governance implies both a strategy and adapted analysis tools
Robert Zoellick may be proposing a New Deal for Global Food Policy, behind which one can make out the urgency to establish world agricultural governance, but he does not, however, offer any precise indication of particular methods to follow, in particular in terms of strategy and tools for "governing".
That is exactly what momagri has been about since its creation in 2005 — defining the practical and institutional modalities for designing a world agricultural governance that places world agriculture at the heart of the Millennium Development Goals (MDGs), the goals of the Rio Conference and those from the Doha Round.
It is within this framework that we are arguing in favor of a gradual and regulated liberalization of international agricultural trade restrictions. In fact, the international community is slowly becoming aware that the complete liberalization of trade cannot apply to agriculture, contrary to what Economics 101 may teach. The reluctance of most countries in the world to take the first step to break the deadlock in the Doha negotiations regarding agriculture is the perfect example. It should not however be concluded that liberalizing trade is not the best possible way of organizing agricultural markets. It is simply a matter of “helping” the natural functioning of agricultural markets in order to address its internal weaknesses, through concerted international regulation.
However, world agricultural governance also requires the establishment of new international cooperation. It is with this goal in mind that momagri has begun a deep reflection into what could be a World Agriculture Organization by defining in particular the governance and regulation principles on which it would be based:
> equilibrium prices by product and by major region, resulting from an international consensus (countries, producers and consumers), adjustable according to each region’s specific goals;
> a new framework for reflection and action which is that of agriculture as a global public good;
> international agricultural markets regulated based on the defining of alert and regulation release thresholds;
> farmers protected from the exogenous and endogenous risks they face, in particular through inventory measures that alleviate the markets shocks.
Finally, providing bona fide global governance for agriculture requires forming adapted analysis tools. From this point of view, momagri designed a new economic simulation model — the only model that takes into account the specific characteristics of agriculture5 and serves as a tool to help national and international decision makers in the most important decisions. It is interesting to point out that one of the foundations of the momagri model reflects one of the primary unique characteristics of agricultural markets brought out by the economist Mordecai Ezechiel, a close ally of President Roosevelt, namely the non-automatic adjustment of supply based on demand and its effect on price volatility. In the same way, it is essential to educate experts and decision makers regarding excesses in agricultural markets and to initiate a regulation by the “power of information”. That is the goal of the international assessment and rating agency (NAR agency) that momagri is going to build using the appropriate indicators.6To date, there is no tool of this type for the agricultural sector, unlike sectors such as manufacturing, finance or even ethics. In filling this void, this agency will become an indispensable tool for a regulated liberalization of agriculture through the provision of accurate information.
1 « An Evaluation of World Bank Research, 1998-2005,” September 24, 2006. This audit report, commissioned by the World Bank to a group of independent experts and made public in December 2006, calls into question the relevance of some World Bank studies.
2 « FAO: The challenge of renewal,” September 2007. Report of the Independent External Evaluation of the Food and Agriculture Organization of the United Nations (FAO).
3 « World Development Report: Agriculture for Development,” March 2007.
4 To get the 21st century off to a good start, in 2000, the member states of the United Nations agreed on seven essential, universal goals to be reached by 2015, called the Millennium Development Goals (MDGs). These goals, which range from reducing by half the number of people living in extreme poverty to achieving universal primary education to reversing the spread of HIV/AIDS, serve as a driving plan of action for developing a better world.
5 For more on this subject, see the article by momagri’s chief economist Bertrand Munier, “An X-ray of the Risk Module within the momagri Model” published on the momagri website under the heading momagri Model.
6 For more on this subject, see the heading NAR Agency on the momagri website.
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