Agricultural leaders see free trade as buffer against recession


By Christine Stebbins
May 18, 2009

ST.LOUIS (Reuters) – Farm trade must play a lead role in fighting protectionism and unwarranted government interventions in free markets as world economies contract, industry leaders told an agricultural forum on Monday.

"There is always in times like this severe political pressure to take measures that are expedient in the short term but turn out to be counter-productive," J.B. Penn, chief economist with equipment maker John Deere, said in a round-table at the World Agricultural Forum.

"There is a growing role for governments everywhere. That seems the fashion. But…history is replete with lessons, especially in the food and ag sector, where the distortions caused by government interventions actually reduce, rather than improve, food security," said Penn, a former chief economist at the U.S. Department of Agriculture.

"We should avoid market interference in the consumption sector — food price controls, export taxes, export embargoes — and avoid government intervention and market distortions in the production sector," Penn said.

Carl Hausmann, president and chief executive of Bunge North America, one of the world’s largest agricultural processors, exporters and fertilizer producers, said economic contraction often fed the temptation for self-reliance.

"The hard part of this is the world’s willingness to accept an interdependent food system," Hausmann said, noting the reactions from markets as varied as 2008’s record high grain prices and 2009’s plunging pork prices on the flu scare.

"During last summer’s food crisis and today during the recent swine flu outbreak, many governments are rethinking their approach to food security and are saying we need more domestic production, we need to be domestically independent," he said.

"I would argue the exact opposite approach is better. Without the free flow of trade in agricultural commodities and food products the health of any given country in any given year is at risk," Hausmann added.

A globalized, interdependent food, farming and fiber system can also mean long-term sustainability to prime farmlands that might otherwise be threatened by production gluts or ruinous prices for farmers blocked from wider global demand, he said.

"By maintaining the productivity of the world’s most environmentally sustainable croplands we produce more crops more efficiently at a lower cost than if each country grew its own," Hausmann said. "The role of trade will be key.

James Bolger, former prime minister of New Zealand and chairman of the World Agricultural Forum, said the stalled Doha round of world trade talks needed to be revived.

Those talks, as in earlier rounds, foundered in large part over differences on agricultural issues between poor developing countries wanting market access to rich nations and those nations, in turn, seeing their farmers under threat.

"It’s going too slow. I would hope that new energy will be put into completing the Doha round," Bolger said.

Developing countries took particular aim at cotton and sugar farmers in the United States, which they said were prime examples of rich countries protecting politically powerful domestic farming sectors in the face of free trade dogma.

But Bob Stallman, president of the American Farm Bureau Federation, the largest U.S. farm group, said developing countries would need to look at their own protectionist policies more honestly if the Doha round was to progress.

"Trade policies are frequently the most protectionist in developing countries," he said. "It’s unfortunate that the Doha negotiations made a fundamental error in equating protectionism with development."

(Editing by Clarence Fernandez)

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