Fixing up fallacies for food security

Question and answer

What can governments in rich countries do about poverty in poor countries, apart from increasing and improving aid and endorsing ambitious poverty reduction goals? Arguably, aid, and of late ambitious poverty reduction goals have the key instruments to face poverty in developing countries. That trade could be more effective an engine than "aid', had never been duly appreciated. There could be many reasons for the failure but one or two should be mentioned. First, "export pessimism" within developing countries deterred trade to develop as an engine of growth and poverty reduction. The famous "Prebish-Singer" hypothesis of a secular deterioration in terms of trade for primary products, possibly, haunted them for a long time. Second, developed countries, allegedly, have been reluctant to open their markets, especially, for agricultural products from developing countries. Domestic pressures from farmers led them to lean on domestic support and protection.

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The authors I have mentioned above came up with an answer: "...get serious about reforming their (developed countries) own farm policies and start dismantling the agricultural trade restrictions and subsidies that contribute to mass poverty across the developing countries". The answer, needless to mention perhaps, brings back the role of trade as an engine of growth and poverty reduction in developing countries. I can only add that the age of aid has gone, and that of trade has dawned! Aid should be substituted by trade and by the rule of the theory of comparative advantage. Unfortunately, the crucial links between agricultural trade, poverty and food security do not figure prominently on the WTO agenda.

Poor getting poorer

Kevin Watkins and Joachim von Braun think that this is not a good news at all especially when related to poverty reduction. More than three-quarters of the poor in developing countries -- some 900 million -- live in rural areas. Majority of them are small holders with tiny lands to till. "That is why agricultural growth based on smallholder producers is one of the most powerful catalysts for poverty reduction: for every $1 generated through agricultural production, economic linkages can add another $ 3 to the rural economy. Support to agriculture in rich countries matters because it restricts opportunities for the pro-poor rural growth that northern governments like to endorse at international meetings. And it matters because the rural poor cannot wait any longer for meaningful reforms".

The policies of the rich countries impinge heavy penalty on the poor of the poor countries. Northern subsidies lower farm prices. Unable to compete against subsidised competition ("concocted comparative advantage" as I termed it in an earlier article), the world's poorest farmers are pushed out of the international as well as domestic markets. It seems that the success depends less on comparative advantage than on comparative access to subsidies and support. "Small farmers are efficient, innovative and potentially competitive and creatively combine farming with off-farm work. But the world's poorest farmers cannot compete against the world's richest treasuries, nor they have to". Available estimates tend to show that if rich countries stop support to farmers, developing countries could gain by $40 billion in terms of agricultural exports.

Crocodile tears!

But they would not go in that direction keeping in view the interests of the developing countries! Eugenio Diaz-Bonilla and Ashok Gulati succinctly summarised their views with notes of dissents. First, it is being argued that farm prices would shot up following an withdrawal of support from agriculture in developed countries. Ipso facto, the net food importing countries could be the victims. This is partly true and could be faced by enunciating welfare enhancing programmes for the targeted victims. In the long run, realignment of resource allocation- after the withdrawal of support in developed countries could bring more benefits for the victims.

The second argument against withdrawal is that preferential treatments in terms of access to markets could be eroded following liberalisation in those markets. And finally, some have argued that by expanding exports, developing countries could worsen poverty and food security by devoting more attention on export crops rather than on staple crops. Both these arguments are not well appreciated by the authors as they overlook the implications of liberalisation in a general economic framework. In fact, they have presented a number of alternatives to deal with the upcoming crisis. By and large, the arguments shown by the developed countries in the interest of the developing countries sounds like shedding crocodile tears -- hurting first and healing second.

Trimming tears

The farm polices of the developing countries are also firmly footed on fallacies. In the travel towards industrialisation, agriculture has long been unduly taxed and robbed of its rhythms. In the name of the green revolution and food security, production of other crops declined. Crop diversification index -- as reflected by Simpson index -- is relatively low in many developing countries. High value agricultural crops have never been assumed as potential source of poverty reduction. Time has come to realise that developing countries reform their own agricultural policies. Capacities must be created to enhance supply elasticities so that the rewards of liberalisation of world agricultural markets could be reaped home. As it stands now, not many of the developing countries would, perhaps, be able to respond to the increased demand in the world markets. Domestic physical and human infrastructure appear to militate against any move towards production for markets. While removing the bias against agriculture, developing countries should embrace rural development -- a forgotten phase -- as the motto towards making markets meaningful. It is not only agriculture but a culture that includes rural livelihood system that should constitute the cornerstone of policies. Empowering local governments, raising human capital and overall good governance should ensure a good economic return from liberalisation.

Last words

It is nice to note that the International Food Policy Research Institute (IFPRI) prescribes trade and not aid for developing countries. It is also heartening to hear of the nexus between trade and food security. We can only hope that developed countries would shift away from fallacious farm policies for better globalisation. And the Cancun debacle seems to have driven home the point that views of developing countries have to be honoured to run a trading system based on justice and "win-win" situation. Meantime IFPRI could help developing countries through researches on capacity creation and crop diversification in developing countries, on policy reforms that would serve the interest best for developing countries. In fact, IFPRI should circulate the slogan "trade, not aid" because aid gained is just a miniscule of what lost in trade.

Abdul Bayes is a Professor of Economics at Jahangirnagar University