Food for thought: the failed neoliberal approach to food

Oxfam & SEATINI | June 16, 2023

Source: Idrissa Ouedraogo is a farmer in the North Central region of Burkina Faso. His millet, maize and bean crops have dried up due to the lack of rainfall, and his animals no longer have anything to graze on. A few years ago, he could sell his crops and use the proceeds to send his children to school and provide them with medical care. Now the money he gets is not enough. Credit: Cissé Amadou/Oxfam.

The unequal global food system is unsustainable for people and planet, and there is an urgent need to rethink how the world feeds its people. We will not solve the long-standing global food crisis, made worse by the war in Ukraine, with the same policy approaches that created it. The combination of extreme inequality and poverty, human rights violations, conflict, climate change and sharp food and energy price inflation, accelerated by the war in Ukraine and the COVID-19 pandemic, has already resulted in hundreds of millions of people not having enough to eat.

While millions of people are struggling to find their next meal, the world’s main food traders have made record profits, and the billionaires involved in the food and agribusiness sector have seen their collective wealth increase by $382bn (45%) from 2020 to 2021, with 62 new food billionaires created in the sector since the beginning of 2020.

The neoliberal promise: market and trade liberalization

For long, policy makers have promoted the idea that a greater reliance on markets, financial actors and trade liberalization will fix our broken food system. However, the reality is that we need to regulate markets, rein in speculation, break up monopolies and create fairer and more flexible trade rules for low- and middle-income countries, if we want to have a fair and sustainable food system.

Trade rules, especially those put in place by the WTO, are supposed to safeguard the ability of all farmers to enjoy equal access to global markets and contribute to food security. However, agriculture interests in rich countries tend to benefit more from trade rules, while people in other countries lose out and face a higher risk of food insecurity. Trade policy tools, including greater space for governments to adjust their levels of food imports and exports, invest in domestic food production and create strategic food security reserves – along with tighter regulation of food commodity markets, and reduced market concentration – are essential structural reforms in the interests of sustainable and resilient food security.

The solution to the global food crisis is not the liberalization of trade at all costs; the full liberalization of food markets only reinforces the structural flaws of the system. It is essential to review trade policy tools and establish better financial regulation to reduce food price shocks, and avoid repeating the failures of the 2007–2008 and 2011 food price crises. The evidence of recent food crises shows that ‘relying on the market’ and promoting more market dependence exacerbates inequality as each new crisis hits.

International trade rules – often negotiated to benefit and protect farmers in rich countries – must be reshaped, with greater flexibility for low-income food-deficit countries (LIFDCs) to control their food imports and exports. Additional reforms to trade rules are needed.

Government intervention: necessary for food security

Transparency mechanisms must be strengthened to improve visibility in food markets. For example, the Agricultural Market Information System (AMIS) – set up by the G20 in 2011 – must be expanded to cover all countries, in order to create a more comprehensive analysis of food stock levels and to ensure the needs and priorities of LIFDCs are taken into account. Important food-producing countries that do not disclose stocks levels, or are legally prevented from doing so, must be called on to provide greater transparency. Private stocks, some of which are held by large agro-industrial groups, must also be included in the assessments, as agreed in the G7 Statement on Global Food Security of June 2022.

Regional strategic food reserves, as seen in projects like the nascent ECOWAS Regional Reserve in West Africa and the ASEAN+3 emergency rice reserve (APTERR), should be encouraged, developed and supported, given the role that stocks can play in buffering the impacts of food crises. None of these developments should be challenged at the WTO as ’trade distorting’, as they have been in the past, but supported as vital food security-enhancing policies.

The principle of flexibility within trade relationships is fundamental. Policy makers must be allowed to modify, adjust and restore tariff, quantitative and non-tariff barriers both in advance of and in the midst of crises, notably to support smallholders and improve national or regional food system resilience. This should be the case within both multilateral trade agreements, such as the Economic Partnership Agreements (EPAs) and The African Growth and Opportunity Act (AGOA), and in bilateral relationships.

Furthermore, provision should be made to allow for temporary dispensations to facilitate trade without requiring any damaging longer-term policy changes. This is especially important in regard to tariff liberalization and the dismantling of other trade policy tools. In particular, OECD country governments should reject opportunistic efforts to use the current crisis to pursue broader long-term trade liberalization agendas and increase their food exports beyond the immediate needs of a food insecurity crisis.

The big players: agro-industry traders and financial speculators

The imbalances in the global food system are also very concerning in terms of market power. Market concentration is so severe that just 1% of the world’s farms control 65% of the agricultural land, and four big traders carry out 70% of global trade in agricultural commodities by value.  Measures to reduce market concentration must be used in scenarios where, for example, only four companies control 70–90% of the global grain trade, or a handful of companies in eastern Europe monopolize the global trade in fertilizers.

Currently, we are witnessing a massive onslaught on seeds especially by the private sector mainly comprised of Multinational Corporations (MNCs) whose focus is profit-making from seed breeding and distribution as a business. The nature of the onslaught that has been brought on by these MNCs is especially being witnessed through the introduction of seeds that cannot be re-propagated, the introduction of patented seeds and advancing policy frameworks that forbid farmers from saving, exchanging, and recycling seed.

The proponents of Genetically Modified (GM) seed insist that they will enable farmers to be able to produce sustainably for both food security and trade but this will further entrench dependency of Least Developed Countries (LDCs) on the Multi-National Corporations for seed and other agro-inputs.

Another major issue is the role that financial speculators have played in international food trade since the early 2000s. As early as 2011, Oxfam documented how deregulation of agricultural commodities derivatives, and the subsequent entry of non-agricultural actors (pension funds in particular) into the market, reinforced the inflation that led to the major food crises of 2007–2008 and 2011.  There is a risk that this situation is being repeated today. Although some reforms have been undertaken since 2011, the lack of regulation remains worrying.

Therefore, in terms of financial market regulation, legislation such as MiFID II and the Dodd Frank Act should be revised and strengthened, and the UN Committee on Food Security‘s Recommendations on Price Volatility and Food Security fully implemented, to tighten position limits and increase transparency on food commodities in financial markets. Commodity index funds that bundle food and fuel investments with other

MATS case study #6 will aim to get a better understanding of the actions that companies (willingly and unwillingly) are doing that are keeping cocoa prices down and therefore potentially harming the right to a living income for cocoa farmers and food sovereignty in general. This better understanding should help (a) business to shift to sustainable business models, (b) legislators to change the trade rules to create a level playing field and (c) governments and cooperatives from exporting countries to increase their negotiating power in global food supply chains.

Based upon Oxfam’s report: Fixing Our Food: Debunking 10 myths about the global food system and what drives hunger

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