On an Open, Fair and Reliable Food System
Mr. Shigeru Endo
Counselor
Mitsui & Co., Limited
Just about a month ago, I was in Bangkok and came across a local newspaper editorial, which said that world trade remains far from free or fair, and that while opportunities increase in an open market, success is by no means assured. The editorial went on to say that agricultural products, commodities, textiles and clothing represent the bulk of the economic production of most countries in the Third World, and that the fact that developed nations maintain trade barriers and subsidies for these products, while simultaneously crying for the liberalization of the trade in industrial goods and services, is cruel, hypocritical double-standard.
Thailand is vigorously reviving. The painful experiences of the financial crisis taught them many lessons. They rightly realize now that liberalization without proper preparation may lead to economic disaster and social disruption.
A few days before, Bangkok people saw an American activist throwing a cream pie in the face of the IMF Managing Director, presumably to save Asians from globalization. People in Asia were confused when they saw huge numbers of NGOs mobilized in Seattle, attacking the globalization trend and calling for a moratorium on trade negotiations.
Is the world changing its course again? How should we build an open, fair and reliable food system in a seemingly confused situation?
Food is essential to life. National leaders want to ensure that their people have enough to eat. This makes food policy a fundamental issue of sovereignty for every country.
Asia is densely populated and arable land per capita is limited. Not every country is able to produce enough food. So open and free trade in food is needed. It lowers food cost to consumers and allocates production to where it can be done most efficiently and in an environmentally sound manner.
There are several important considerations to be made in developing a food system. The followings are my points and questions.
First, freer trade in food alone is not sufficient. As the Thai newspaper
emphasized, countries need access to world markets to sell their goods in order to finance their food imports.
Second, because of the political and social significance of food, equal treatment for domestic and international customers must be a fundamental principle of world food trade.Exporting countries must provide importing countries with assured access to supplies. But how can this be done,and be assured?.
I myself experienced a soybean embargo imposed by President Nixson in 1973.All the outstanding soybean contracts were cut to half. Soybeans are an important source of protein for Japanese people and certainly this unexpected one-sided action put the country into turmoil. Since I was in the grain importing business, the embargo meant that half of my soybeans suddenly became a long position to be liquidated in the sharply declining US market. At the same time I had to pay high prices for non US soybeans to fulfill my sales contracts in Japan.
I doubt if the US is ready to exclude food from the Export Administration Act of 1969 , eliminating the grain and food embargo even in case of emergency. I also doubt if the world trusts an American assurance on an equal access to their supplies. It is unrealistic for any country to rely 100% on imports to feed itself. A certain level of self-sufficiency is required. Japan's dependence on imports is extremely high. There should be an effort to make Japan's agriculture efficient and sustain a certain level of production, in addition to the so-called agriculture's multi-functionality.
Third, there is a grave concern about the world's ability to supply enough food at a stable price. Many countries have begun to shift from traditional agricultural policies to a more market oriented system. Governments are reducing its risk management programs and are reluctant to carry grain reserves.
Particularly, agriculture in the US has been changing drastically since 1996. Now, it seems to be heading for an integrated commercial system involving farmers, farm suppliers, processors, exporters and retailers, and this system may be controlled by fewer and larger companies. Recently I hear the criticism that this trend may undermine marketplace competition. The countries in the world which depend on their food supply from the United States are greatly concerned with the direction of US agriculture..
Basically, if we have to depend on a system of market-based profitability, importing countries would like to see a competing supply source elsewhere, and as many as possible. Particularly, countries in the Southern Hemisphere, which are opposite in season, should be encouraged to become more important suppliers. Some countries need improvement in their production , processing, distribution and exporting capabilities. If trade is to smoothly balance food production and demand, these bottlenecks must be removed. Major importing countries should more actively participate in developing products for import, not just in improvement in ports, transportation, storage facilities, etc. The idea of Supply Chain Management may play a more important role in linking everybody from consumers to producers.
Fourth, as proposed to APEC leaders last year, improvement in infrastructure is needed to promote efficient processing and transportation of food ,both within and between APEC economies. Actual actions have been already been initiated by PECC committee.
Fifth,regarding long term supply capability, I believe any real increase will come from raising yields. Increasing yields at lower cost and in an environmentally sound manner can only be achieved through science and technology . The GMO is one area which, I believe, should be promoted properly.
The world's agriculture and food system must continue to meet challenges from never ending changes and ever increasing food demands, particularly with China entering into the global food system.
It is not an easy task for us to build an open, fair and reliable global food system, but we need to keep searching for an answer.