Food and Energy Security

							                                  Food and Energy Security Challenges


Many people think that the only commonality in the three recent crisis of surge in food and fuel
prices and the financial crunch is greed. But there is at least one more commonality and that is
the lack of any international rules or oversight to conduct business in these three areas.

Ordinarily if one wants to sell cars or shoes or shirts or sell a computer program, there are well-
defined international rules. There are restrictions on making price-fixing cartels, giving trade
distorting subsidies or conducting business without collaterals. However, if a country decides to
impose high export tariffs or even go a step further and completely restrict export of say rice or
wheat or deprive international market of an essential commodity such as corn or oilseeds and
divert all its production of such products to producing ethanol and make this viable through high
subsidies and thus put at risk the food security of other countries or in another scenario a group
of countries get together and limit production of an essential raw material such as oil to extract
maximum prices, there is at present no international law to guard against such practices.

While WTO has rules for conduct of international business in manufactured goods, intellectual
property or to some extent in services, there are no rules for energy and financial products. Even
the WTO rules for agriculture are so flexible that almost all practices which in case of
manufactured goods are considered big sins are allowed without any restraints. Even the so
called ambitious Doha Round does not envisage any disciplines for any of these matters.

Why do we not have any rules when there are rules for everything else? It is because of powerful
multinationals and interests of powerful countries. So long there are no problems or crisis; very
few like to challenge this status quo. But with the recent crisis in all three areas, laissez-faire
policies are being questioned all around. At the recent UN General Assembly in New York,
many world leaders questioned the lack of financial oversight as well as inability of the current
global systems to address the food and energy crises.

But all this is just the tip of ice-berg. World population is increasing by more than 200,000 each
day and by 2042, it is expected to cross over $ 9 billion from the current $ 6.7 billion. Added to
this is the impact of climate change when highly populated countries such as those of South Asia
may lose their productivity during this time by a fifth or more. Even if nothing was to change, we
could consider the impact of changing eating habits. In 1980, meat consumption in some
emerging markets was 20 kg per capita which has risen to 50 kg per capita in 2007. It takes over
10,000 liters of water to produce 1 kg of beef. Imagine the impact on water resources.

What can be done to ensure food and energy security. Food insecurity exists when people lack
secure access to sufficient amounts of safe and nutritious food for normal growth and
development and an active, healthy life. Energy security means having a reliable supply of
affordable energy. Both are needed. How can one ensure that emphasis on one of these does not
deprive people, in particular poorer people, of the other security? It is clear that much more than
in the past, agriculture and energy markets have a close nexus. It is the recent big surge in oil
prices which encouraged the switch from food crops to energy crops. In 2007, approximately
one–fourth of the corn production in the US was used to produce ethanol whereas in the EU

IMD Lausanne – 4/5 October 2008 -- Fifth Multi-stakeholder Dialogue entitled Trade & Climate Change:
Collaboration or Confrontation? Organised in collaboration with the Friedrich-Ebert-Stiftung in Geneva
                                  Food and Energy Security Challenges

about half of vegetable oil production was used in the production of bio-diesel. Even these huge
diversion of food crops met less than 5% of fuel market needs in the United States and the EU.
What if US and EU were to double their fuel market needs through bio-fuels?

Some of the solutions which will have to be developed are to increase agricultural productivity
and improving technology to use raw materials such as agricultural waste for fuel production. At
the same time current policies which are highly discriminatory against developing countries
would have to be reviewed. For example, European biodiesel production costs more than double
that of Brazilian ethanol. However, through high tariffs of over 50% and subsidies of more than
$4.7 billion, the EU biodiesel industry is surviving. Why not reduce tariffs and allow imports of
biofuels? This would save conversion of much less efficient food crops from being converted
into bioenergy fuels but at the same time allow farmers of developing countries to earn more
from their agricultural exports. This would improve food and energy security situation for
developing as well as developed countries.

Finally, I would like to say that the challenges from food and energy security are extra-ordinary
and need matching and well-coordinated international response. Various multilateral initiatives
such as the FAO’s initiative on high food prices and the WTO’s Doha Round need strong push
and support of international community. Successful conclusion of these initiatives would to some
extent meet avert the crisis. For longer term, there is a need to have well-considered rules and
policies in place so that there is international cooperation rather than conflict in addressing such
conflicts.

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IMD Lausanne – 4/5 October 2008 -- Fifth Multi-stakeholder Dialogue entitled Trade & Climate Change:
Collaboration or Confrontation? Organised in collaboration with the Friedrich-Ebert-Stiftung in Geneva