Agriculture Ministers from the G20 countries met in Paris on June 22-23 to develop an action plan to submit to the G20 leaders’ summit in November. The current Chairman of the G20, Nicolas Sarkozy, President of France, has made food security one of his priority issues and called the first ever G20 Agriculture Ministers meeting. The Ministerial Declaration is more market oriented than expected and will be known for what was excluded as well as included.

 

The Ministerial Declaration provided an Action Plan on Food Price Volatility and Agriculture with five major objectives: (1) improve agricultural production and productivity, (2) increase market information and transparency, (3) strengthen international policy coordination, (4) improve and develop risk management tools, and (5) improve the functioning of agricultural commodities’ derivatives markets. Increasing production through productivity improvements is at the heart of food security in a global sense, but market signals and government policies will drive outcomes through supply chains that start at the farm level.

Efforts to improve agricultural productivity and total output as envisioned by the Ministers are driven by technology research. Research is driven by money, public and private. The many existing research efforts are to be strengthened and a new wheat research initiative begun. The plan recognizes the need “to establish proper investment environments, including through improvement of law and regulations.” ‘Sustainability’ was mentioned often, but not defined, and biotechnology was not mentioned as one of the new technologies. The only mention of farmers was “we will give special attention to smallholders, especially women and young farmers, in particular in developing countries.” With most national governments under severe budget pressures, private investment will likely play a larger role than expected in technology development and transfer to farmers.

Increased market information and transparency is a particular interest of President Sarkozy. A new Agricultural Market Information System (AMIS) is to be created within the Food and Agriculture Organization (FAO) of the UN with cooperation from the International Grains Council, which already has a grains information system. The real key to this effort is the involvement of the G20 countries with invitations to other major producing, exporting and importing countries. China, India and Russia are G20 members and among the most difficult from which to get complete, up-to-date information. Any significant change in information flows will require new commitments from governments to provide more information on a consistent basis. The Ministers also supported a Global Agricultural Geo-Monitoring Initiative to use remote sensing tools for crop production forecasting.

International policy coordination is a natural concern for the Agriculture Ministers. They see FAO as the key coordinating group, particularly its Committee on World Food Security, created in the 1970s in the midst of another food crisis. They also moved to create a ‘Rapid Response Forum’ made up of senior agricultural policy officials of the G20 countries to provide early exchange of key information on and discussions about prevention of crises and responses to them. The Ministers noted the role of international trade in improving food security and reducing food price volatility by allowing the unrestricted flow of agricultural commodities and food. They agreed to ban restrictions on exports of humanitarian food aid to the World Food Program. Biofuels were mentioned in this section where the Ministers agreed to “address the challenges and opportunities posed by biofuels.”

The section on risk management tools was positive for public-private agricultural insurance and contracts between farmers and suppliers of inputs and buyers of output as ways to manage price volatility and provide predictability in the supply chain. They supported efforts by the World Bank to develop risk management tools for governments and firms in developing countries and a tool box approach where each country, firm and farmer could decide which tools would best fit a situation. They also requested that the World Food Program conduct a feasibility and cost-benefit analysis on a targeted emergency humanitarian food reserve system to complement existing regional and national food reserves. These types of reserves have been talked about in past food crises, but have proven hard to manage.

Commodity market regulation was also a major focus of President Sarkozy, but work on that was shunted over to the G20 Finance Ministers and Central Bank Governors to address. The Ministers did acknowledge that agricultural financial markets for price discovery and hedging price risks are important for well-functioning physical markets.

The outcomes of the two days were more positive for international trade and market solutions to food security issues than had been feared by some analysts, but there is nothing that will solve food security issues. All issues deal with individual farm, firm and country decisions on agricultural research, food production and government regulations not easily changed by G20 actions. The Ministerial Declaration provided a benefit by highlighting dozens of ongoing efforts from technology research to risk management plans that are already having an impact.

The declaration also provides plenty of common ground where exporters and importers can work together to increase production and provide better diets for people though unrestricted trade. This work goes on 365 days each year and does not need to wait for a once in a while two-day G20 meeting. WTO agreements and the many bilateral and plura-lateral agreements serve an important role in normalizing trade flows under terms that have been agreed to by all parties. They also attract private investment that was identified by the Ministers as a key to technology development and increased food production.

Past G20 summits have addressed food issues, but have had limited follow through. That should not be surprising given their complexities and competition for time and money of other issues. The best outcome is to again call attention to program that work and encourage national governments to remain committed to the cause.
 

Ross Korves is the Economic Policy Analyst for Truth About Trade & Technology.