On June 27, 2008 Wilson Center on the Hill hosted a seminar featuring Bruce Stokes, International Economics Columnist from the National Journal, Sandra Polaski, Senior Associate and Director of the Carnegie Endowment for International Peace, and Kim Elliott, Senior Fellow from the Center for Global Development. David Klaus, Consulting Director of Wilson Center on the Hill, opened the discussion by highlighting a June 6, 2008 article by Stokes in the National Journal, "Food is Different," in which he questions the ability of the markets to stabilize food prices in light of rising costs and concerns of widespread famine. Similarly, this forum was aimed at understanding these issues, as well as the effects of soaring food prices in the globalization era and the role of the United States in alleviating the crisis.

The program began with a discussion on whether the increase in food prices is justifiable considering the overall increase in commodity prices. Elliott noted that distortions in the food market over the past few years actually kept food prices too low for adequate supply, thereby reducing incentives for farmers to produce and government investment in agricultural development. Moreover, the rise in prices today has a positive impact on some impoverished regions by encouraging farmers to plant more while increasing demand paves the way for much-needed improvements in agricultural infrastructure. However, she conceded that prices today are too high and have increased, "beyond what is needed to encourage farmers to plant more," resulting in panic and stockpiling in many countries.

Polaski expanded on the impact of high food prices on poverty reduction. While current studies show that in India and China subsistence farmers are benefiting from the higher prices, urban households in countries in Latin American and Africa that are no longer food exporters are much worse off. These findings prompted Stokes to question whether the current crisis is the result of too much or too little globalization. In response to which, Polaski explained that the answer is really both. Trade will always produce winners and losers, but to date the farmers in developing countries have been the losers.

Polaski cited the following example, in Mexico under the North American Free Trade Agreement (NAFTA) the poorest, least integrated states did not benefit from trade liberalization. Small farmers lost out as tariffs dropped, forcing Mexican corn prices down. She urged the need for future trade to "create the opportunities for them to have other livelihoods before wiping out their existing livelihoods." Stokes mentioned that the NAFTA debate misses the key point which is that these failures were not due solely to trade liberalization but also to inadequate public policy that did not create necessary job opportunities to absorb the losers. In fact, the Mexican government also decreased the budget for agricultural development, further harming the free trade initiative. Polaski added that agricultural transition often takes 30 to 40 years and requires very good government direction for success.

In the context of trade liberalization, Elliot discussed the potential impact of the World Trade Organization's (WTO) Doha Development Round on the current food crisis. She suggested that although the effect in the short run would be limited, in the long run these agreements could have a positive impact on agriculture by improving incentives for farmers. She stressed the importance of allowing developing countries a degree of flexibility in liberalization policies considering the volatility of food prices. Furthermore, in dealing with market failures the Doha Round must encourage infrastructure development instead of relying solely on market based principles, which have failed to smooth price volatility.

Stokes, citing Robert Zoellick, President of the World Bank, said that stocks are lower than they have ever been even with higher food prices. This led to the question of whether food should be treated differently than other globally traded products considering that, "the economists have had their chance" and have repeatedly failed in preventing market failures. Polaski agreed that food is and has always been treated differently. "Food is actually more important than oil, so there do have to be reserves." On one hand, international food markets are experiencing more liquidity -- which is good. However, Polaski asserted that developing countries should still be allowed the flexibility to stabilize the prices of their farmers' goods. They need safeguard mechanisms that can be reinstated if imports flood the markets.

Specifically, Polaski attributed the failures of the Doha Round to the lack of interest from the business community. American companies have not supported Doha because it is not in their interest, "most firms currently have more opportunities [in international trade] than they are able to exploit." However, she remains optimistic that in late 2009 or 2010 there will be another global trade round after transitions take place within the European Commission, the U.S. executive administration, and the Indian government.

Stokes's final question for Polaski and Elliott was whether the global food crisis will remain in the media -- "is it already too late to maintain government attention?" Elliott noted that the upcoming meeting of the G8 will be a chance to refocus the issues towards food. Also, foundations such as Gates, Rockefeller, Hewlett, and others are making the food crisis a major priority. "Their commitment will go on even when it's not in the headlines."

Polaski stressed that the U.S. government should do more in response to the crisis. Yet, so far in Congress there is not much positive action taking place. "How do you institutionalize the kinds of responses this crisis has shown to be necessary?" This will require the next U.S. President to focus on adopting an overall food security strategy designed with interagency coordination, along with an overhaul on the entire foreign aid system.

Drafted by Sarah Eversman, STAGE Program