13 posts categorized "Trade"

Did you know that over the past decade (2001- 2010), six of the world’s 10 fastest-growing economies were in Africa? Countries from Ghana in the west to Mozambique in the south have demonstrated consistent growth and the trend is expected to continue.  A number of factors account for this growth, including technological innovations, political stability, trade and investment. For example, according to the World Bank, malaria takes $12 billion out of Africa’s GDP every year. But thanks to more and better technology that allows for affordable treatment and mosquito-treated bed nets, death rates have fallen by 20%. Trade and investment are also on the rise- in 2010, total foreign direct investment was more than $55 billion—five times what it was a decade earlier, and much more than Africa receives in aid.

So it makes perfect sense that Sen. Chris Coons (D-DE), chair of the Senate Foreign Relations Subcommittee on African Affairs, hosted an Opportunity: Africa conference last week. The event, held in Wilmington, DE, on January 18, connected Delaware residents with some of the nation’s leading authorities on sustainable development and trade with Africa. Bread for the World and other participants examined how businesses, faith communities, and individuals in the state can benefit from engagement with Africa.

The conference reflected Sen. Coon’s own commitment to improving the lives of people around the world – a commitment inspired by an early experience studying abroad in Kenya. For example, he is a leading advocate for malaria prevention and serves as co-chair of the bipartisan Senate Working Group on Malaria.

The Africa of today offers good opportunities for U.S. investment. In his welcome address, Coons said: “Whether it is businesses taking advantage of fast-growing new markets, local faith-based organizations engaging in humanitarian work, or individuals interested in promoting development, Delawareans have shown themselves to be extraordinarily interested in engaging in Africa. I organized this conference to help them do that and to help make sure Delawareans have the information and resources they need to connect with tremendous opportunities for engagement afforded by the continent."

In his keynote address, USAID Administrator Dr. Rajiv Shah noted: “Robust growth rates, a new commitment to health and agriculture, and significant advances in science and technology are creating new opportunities in development on the African continent.”

Administrator Shah argued that these gains should be supported and sustained by a U.S. commitment to long-term investments. Making resources available through well-planned programs such as Feed the Future will enable African countries to develop their agricultural infrastructure in sustainable ways and diversify their economies. Feed the Future aims to free 18 million people, more than 7 million of them children, from poverty and malnutrition. The 1,000 Days initiative takes advantage of a unique window of opportunity – the 1,000 days between pregnancy and a child’s second birthday – to create a healthier future for an entire generation. This is because the right nutrition during this period is critical to a child’s ability to grow, learn, and ultimately rise out of poverty.

Faustine Wabwire is foreign assistance policy analyst at Bread for the World Institute.

During their June 2011 meeting in Paris, the agriculture ministers of the G-20 countries highlighted the vital role of global agriculture—both now and for the future. In the Ministerial Declaration - Action Plan on Food Price Volatility and Agriculture - the Ministers also acknowledged that strong global governance is an indispensable element for achieving food security, nutrition, and security, and called for greater policy coherence.

These are good first steps. A lot more is needed urgently.

According to the International Food Policy Research Institute (IFPRI), food prices have now reached peak levels not seen since the 1970s as maize (corn), wheat, and sugar prices have doubled or tripled over the last year. The sudden spikes in staple food prices that began in 2007 have ushered in an era of high prices combined with volatility. These conditions affect all families, but especially those who are poor—because poor people spend so much of their entire incomes, often 50 percent to 70 percent, on food. It is very difficult for them to adjust to rapid price increases because there is little discretionary spending in the household budget. There are also indirect economic costs. When food prices increase and families have less to spend on other goods and services, there is further weakening of already fragile local and national economies. In many low-income countries, high food prices are a major direct contributor to hunger and poverty.

Food Prices in Somalia—Price Changes (June 2010 - June 2011)

Source: FAO GIEWS

Large changes in family income due to price swings such as these can reduce children’s consumption of key nutrients during the first 1, 000 days of life from conception- leading to a permanent reduction of their future earning capacity, increasing the likelihood of future poverty and thus slowing the economic development process.

Given the complex web of factors that affect global food security, international organizations and the governments of both developed and developing countries must use a comprehensive approach to prevent a food crisis from reoccurring.

This week, on November 3-4, G-20 leaders will meet in Cannes, where they must find ways to deal with the increasing global food price volatility that is hurting poorer countries. At Cannes, the G-20 leaders should:

• Commit to providing more resources for investment in agriculture or at least to honoring their promises to fund the Global Agriculture and Food Security Program (GAFSP)
• Look to institutional development and assist Africa in the development of privately-held commodity exchanges;
• Discuss the links between biofuel policies and food prices, with a view to mitigating the impact of biofuels on food prices;
• Agree to avoid export restrictions on food;
• Make progress toward liberalizing trade in agriculture and reducing the most distortionary aspects of tariff escalation and non-tariff barriers.

A food-security strategy that relies on a combination of increased small holder productivity in agriculture, greater policy predictability and general openness to trade will be more effective to addressing global food security.

A new farm bill is expected in 2012, which means 2011 will put us right back into the thick of the debate about reforming U.S. farm policy. Bread for the World worked on farm bill reform in 2007-08. In the end, the bill that passed didn't look much like reform.  

Much has changed in farm country since then. The 2012 Hunger Report, which will come out in November 2011, will be about food and farm policy and have the obvious intent of influencing the farm bill debate. Over the next year, here at Institute Notes we'll be blogging regularly about issues related to the farm bill.

Currently one of the most interesting farm-bill issues to me - flying relatively quietly under the radar for now, but one that could emerge as a useful lever for reformers - is the extraordinary rising cost of farmland across the Midwest. We may be seeing an asset bubble building, mostly due to high grain prices and the effects of ethanol subsidies.

From the Wall Street Journal, came this ominous sounding editorial yesterday:

“The overall U.S. economy may be struggling, but you wouldn’t know it from a visit to the Farm Belt. A boom is under way across much of the rural Midwest, with agricultural land prices growing at a double-digit clip and farm auctions in certain counties fetching record sales.

“One question to ponder: Is this boom rooted in genuine economic gains, or is it another Federal Reserve-induced asset bubble? We lean toward the bubble view.

"After a very detailed analytical look at several economic variables, we hope Fed Chairman Ben Bernanke is right when he says asset bubbles and price spikes in commodities are nothing to worry about. Of course, he said the same thing about housing and oil in the last decade. We’re not predicting an imminent bust, but we do hope someone at the Fed is watching prices grow in farm country.”

So what's this got to do with farm bill reform? Given how we got into the Great Recession, I think the expression "asset bubble" has about as toxic a connotation as you can get these days. The Journal editorial seems to be putting the blame on the Fed Chairman, but the real reason for the asset bubble are the government policies designed to prop up wealthy farmers and ethanol blenders, which have the knock on effect of articifically elevating the land values where the subsidies are going. If the bubble bursts, or rather when the bubble bursts, that means everyone living in those areas will suffer the effects. 

I believe this can be a lever for reformers to grab onto.

The Institute’s 2011 Hunger Report, Our Common Interest: Ending Hunger and Malnutrition, has just become available online at www.hungerreport.org. The 2010 Hunger Report, A Just and Sustainable Recovery, which had been the default landing page till today, remains available on the site along with the 2009 report, Global Development: Charting a New Course.

Who will feed the future? Nepal is one country where the U.S. will increase investments in agriculture. Photo: Richard Lord

At the 2009 G-8 Summit in L’Aquila, U.S. leadership was instrumental in gaining the commitment of member nations to $22 billion to improve global food and nutrition security. For its part, the Obama administration developed its own initiative, Feed the Future. Bread for the World, along with several U.S. civil society groups, provided input into the design of the program. The 2011 Hunger Report is concerned with events that led to the establishment of Feed the Future and with what it will take for the initiative to succeed.

The report argues that Feed the Future is a bold step forward in U.S. foreign assistance, possibly the best opportunity to come along in decades for the United States to contribute to lasting progress against global hunger and malnutrition. Feed the Future stands out with its dual focus on boosting incomes of smallholder farmers and improving the nutritional status of mothers and children, the groups most at risk of hunger and malnutrition.

The report starts with the spike in food prices in 2007-08 that pushed the number of people who suffer from hunger to more than a billion for the first time in history. Prices have fallen since then and so has the number of undernourished people, but as we are seeing in 2010, grain markets are still quite volatile, and so food prices remain a great concern.

For children born in the poorest parts of the world during the 2007-2008 food-price crisis, higher food prices meant that their families could not afford staple foods let alone the more nutritious foods. A series of articles in the British medical journal, the Lancet, published in early 2008 had immediate relevance, as it pointed out that malnutrition during the window of opportunity during pregnancy and in the first two years of life has irreversible consequences for a child. For children who survive early childhood malnutrition, the physical and cognitive setbacks are lifelong, leaving children more prone to illness throughout their lives and reducing earning potential.  

The 2011 Hunger Report includes several recommendations to strengthen Feed the Future and U.S. foreign assistance more broadly. Feed the Future must take a comprehensive approach to fighting hunger and malnutrition, adopting the following elements: increase the productivity of smallholder farmers, help them reach markets, take advantage of the links between agriculture and nutrition while scaling up evidence-based nutrition interventions (especially for pregnant women and young children), empower women, strengthen safety nets, and respond quickly to hunger emergencies.  

Dr. Rajiv Shah, USAID administrator, described "Our Common Interest" as "The best report I've seen in years on this issue" in remarks at the National Press Club.

Moreover, the report argues, Congress should rewrite the 1961 Foreign Assistance Act to make clear that poverty reduction and development are key elements of U.S. foreign policy and reduce earmarks to ensure that U.S. development assistance has the flexibility to respond to realities on the ground. U.S. food aid should be improved to allow for a greater focus on nutritional quality, especially to reach infants and young children. In addition, the United States should take the lead in strengthening international institutions that are complementary to U.S. bilateral assistance in fighting hunger and malnutrition.

After decades of underinvestment in agriculture, Feed the Future is a refreshing throwback to when agriculture held a much more prominent place in U.S. foreign assistance. But Feed the Future has the potential to be much stronger than earlier U.S. programs. Its focus on country-led development is encouraging, but this must include building the capacity of national governments to sustain the progress begun with foreign assistance, and should also include building the capacity of civil society to hold national governments accountable for what they do with this assistance.

The 2011 report is available online and in print and anybody who wants to order a copy can do so via the website.  The online edition includes everything in the print edition and several other features. The Hunger Report has always been a comprehensive source for data on hunger, poverty and other development indicators. The Hunger Report website allows you to visualize these data. An assortment of information covered in the report is displayed in eye-catching graphics. 

Enjoy the report. Tell us what you think of it. And please, get the word out about it.

Remember the hunger crisis of 2008, when food-price spikes drove an additional 130 million people into hunger. At Bread for the World Institute, we talked a lot about what was at the bottom of this in our 2009 hunger report: rising gas prices, droughts, lack of investments in agriculture, better diets in some parts of the developing world, and a surge of investment in biofuels.

One thing we didn’t talk about in this report, but later proved to be a crucial factor was derivatives trading. As Robert Reich explains in his Salon column today, “derivatives are bets on whether the price of certain assets will rise or fall, bets thereby "derived" from asset prices.”

In 2008, those assets included fuel and farm commodities. Basically, the same reckless speculation in the housing markets occurred in these markets. In fact, once the housing market went bust in 2006, Wall Street investors went looking for the next best bet, and farm commodities were part of their rampaging appetite.  Food First has a good blog post from a couple of days ago on this, and the Institute for Agriculture and Trade Policy (IATP) out of University of Minnesota has also been writing about this for some time.

If you’re following the financial reform debate, you probably know that Senator Blanche Lincoln of Arkansas has proposed putting new restrictions on derivatives trading. The Lincoln provision doesn’t eliminate the possibility of 2008-like price spikes happening again, but it does force large Wall Street investment firms from being able to gamble as recklessly as before.

Currently, when Wall Street gambles on derivatives, they're doing it with tax-payer guaranteed bailouts if the bets go bust. We bailed them out after they melted down the world economy, forced millions of people into unemployment and poverty, and drove 130 million people in the developing world into hunger. Bailing them out adds insult to injury.

Lincoln’s derivatives provision currently undoes some of the deregulation of the 1990s, specifically the abolition of the Glass-Steagall Act, which separated boring old banking from the kind of casino capitalism practiced by large financial institutions like Goldman Sachs, CitiBank and Lehman Brothers. Lincoln’s provision wouldn’t restore Glass Steagall, but it would force the big Wall Street firms to give up derivatives trading if they wanted government to insure their bets. 

During the 2008 farm bill negotiations, Senator Lincoln was unbending in her support for subsidies to US farmers, something Bread for the World fought hard to reform. I don’t know where the senator’s mojo on derivatives is coming from—but who really cares? She deserves all our support on this one.

There are a few articles that I think are worth calling attention to:

There are signs that farmers in India, China, Australia and other parts of the world are beginning to respond to higher food prices by planting more food crops. This will certainly ease pressures on the record high prices that we have seen in the last 18 month--but particularly in the last six months. This is good news for consumers. The story suggests that rice and grain prices have not come down as much as wheat and soybean. A WSJ article and reports from the World Bank and USDA suggest that while prices have and will continue to decline in coming months as a result of a supply response, it is unlikely that they will go down to pre 2004 levels, when they were quite low. Grain prices in particular will remain high because of the ethanol mandates and subsidies in the US that are diverting corn and land away from food and feed production. For people living in extreme poverty and hunger, an easing of food prices may be of some comfort but they are still very vulnerable to even the slightest fluctuations and will continue to face enormous challenges feeding their families. They need the skills, tools and physical strength to lift themselves out of poverty once and for all and that is where development assistance, trading opportunities, and good governance come in.

This morning's New York Times has a piece by Roger Cohen about Ghana--the kind of story you don't see much in our media about Africa or anywhere in the developing world quite frankly. But many developing countries are making progress, leap frogging technologies, facing up to challenges and there is an energy and intensity about the changes that is quite enticing. Of course there are a great many challenges, far too many people (862 million) go to bed hungry but as Cohen acknowledges, very few of these type of stories make the papers.

The definitive collapse of the WTO Doha Round is an overall setback for global food security, but the successful completion of the Doha Round would have entailed costs of its own. A recent study – The Promise and the Perils of Agricultural Trade Liberalization – Lessons from Latin America – by WOLA (the Washington Office on Latin America) and GDAE (Global Development And Environment Institute at Tufts University) points out how agricultural trade liberalization in Latin America has been considerably less than an unqualified success for the rural sector in the countries examined (principally Brazil, Argentina, Bolivia, El Salvador and Mexico).

The question the study seeks to answer is whether the sweeping agricultural trade liberalization undertaken, at the encouragement of the U.S., the IMF and World Bank, have resulted in sustainable rural development. And the answer is, “not really.”

After nine intense days, WTO members have again walked away from negotiations without a deal. We’ve heard the death knell for the Doha trade round several times over the past two years. But despite assertions from some that talks could yet be revived (http://www.reuters.com/article/newsMaps/idUSL943708520080729), this collapse looks to be for real. (http://ap.google.com/article/ALeqM5hnRUkzvRHgL5sj3sGymTKixh3DyAD9289GNG0)

Once again, the major sticking point was agriculture – protectionism vs. the desire to open markets and increase global trade. And again, protectionist sentiments seem to have prevailed, despite the clear evidence of greater mutual economic gain through expanded trade.

For the most part, free trade has been a boon to poor people around the world. Free trade, maybe more than anything, has helped raise hundreds of millions of people out of poverty. There is of course a downside. In the United States, many low-skill workers have lost their jobs because of free trade.

Last year, I toured Michigan and Ohio and talked to lots of people who lost manufacturing jobs because their plant had moved overseas. It was always sad, sometimes poignant, and I can't minimize these people's pain. We need better safety nets for people whose jobs vanish because of free trade. Basically, we need better safety nets in this country that all people could benefit from, not just those who lose their jobs as a result of foreign competition.

For those who have been closely following the farm bill fight, it’s old news that another milestone has been reached in efforts to reauthorize the farm bill. For those who, in this holiday season, have more important things to think about than the arcane parliamentary proceedings of the Senate, what you need to know is that despite a majority of support for several reform-oriented amendments, the Senate passed bill is the equivalent of a big lump of coal to fill your Christmas Stockings. The process was a fairly rocky one – Ken Cook over at the Mulch Blog has a good post on the tricky politics behind the process and outcome. In the end, despite the well coordinated efforts of groups like Bread for the World, Oxfam, The Environmental Working group, Environmental Defense, Taxpayers for Common Sense, and scores of others, reform efforts were thwarted.