Protection penalises poor

February 17, 2015

Protectionist trade practices penalise the poor:

Trade policy adjustments to insulate domestic markets when world food prices spike have been ineffective in dealing with food price shocks that exposed millions of people to poverty in developing countries, a World Bank researcher told a New Zealand agricultural economics conference this week.

Dr Will Martin, the manager for agriculture and rural development research in the World Bank is an Australian who has worked for the Washington-based World Bank for the past 25 years. He is also President-Elect of the International Association of Agricultural Economists. He was speaking to more than 250 international delegates attending the Australian Agricultural & Resource Economics Society’s conference in Rotorua this week.

His analysis of detailed expenditure and agricultural production data from 31 developing countries assesses the impacts of changes in global food prices on poverty in an effort to understand their impacts on the poor.

Food price increases unrelated to productivity changes in developing countries raise poverty in the short run in all but a few countries. “That’s because the poor spend large shares of their incomes– frequently about 60-70 percent–on food and many poor farmers are net buyers of food,” he says.

“However, in the longer run, if prices stay high, two other important factors come into play. Poor workers are likely to benefit from increases in wage rates for unskilled workers resulting from higher food prices, and poor farmers are likely to benefit from higher agricultural profits as they produce more food. As a result, higher food prices appear to lower global poverty in the long run.”

He says a natural and understandable policy reaction for many countries when food prices rise is to lower domestic prices through levies on exports, temporary import tariff reductions, or import subsidies. “But these are beggar-thy-neighbour policies that push up world prices,” he says. He estimates that these policies accounted for nearly half the increase in world rice prices in 2007-8. Individually, most countries took action that reduced the impact of higher world prices on the poor. But, when the contribution of these policies to the higher world prices is taken into account, they turn out to have been ineffective.

“What countries need is a collective approach that enables relatively open trade to continue in those circumstances. Clearly, this still needs to be combined with social safety nets so poor people can cope in the short term, but then realise the longer term benefits of higher prices. We need to deliver policies that actually work rather than policies that appear to work.”

Dr Martin says countries need to develop this ‘social safety net’ so the poorest can get access to what they need when they need it.

He says the World Trade Organisation (WTO) showed with the abolition of variable import levies in the Uruguay Round that it can introduce trade policies that bring about the kind of collective action needed to tame food price spikes.

“The collective agreement of the EU-US over export subsidies in the Uruguay Round also showed what can be done when there is clear recognition of the problem. It’s much more complex when many more countries are involved but we need to keep working away at the challenge if we are to make progress. Getting the confidence of policymakers to act differently will require a lot more research and policy formulation.”

Most people, rich or poor, farmers or not are net buyers of food. All will be affected by price rises and the poor, who spend a greater proportion of their income on food,  will be hardest hit.

Export bans and other protectionist measures might help the poor in the short-term but it is a temporary fix.

Policies which increase wealth rather than those which artificially keep prices low provide the best long-term solution to poverty and hunger.

The solution to poverty and food shortages isn’t restrictive trade practices, it’s liberalising trade.

The challenge is how to help the poor cope with price rises in the short-term until they benefit from improved incomes which enable them to afford more food.

 


Rural round-up

January 21, 2015

Action needed now to minimise drought losses:

Farmers need to act now if they are to cope with the effects of a predicted drought in Canterbury, Lincoln University experts say.

But they also need to be thinking long-term with more dry-spells looking likely.

Chris Logan, Animal Programmes Manager at Lincoln University, says it seems the region may be in for a hard drought of a kind which has not been seen for some decades. . . .

 HSBC says global dairy prices should recover:

HSBC’s economists are expecting global dairy prices will start recovering from current lows, largely because of a sharp run-down in Chinese dairy imports.

Paul Bloxham, HSBC’s chief economist in Sydney, said Chinese imports had dropped to seemingly unsustainably low levels.

He said once China begins buying again, prices should at least partly rebound.

Global Perspective Will Help NZ Agribusiness Grow:

An agribusiness symposium with a global focus will help New Zealand businesses continue to develop their production, marketing and logistics skills to grow sales and exports.

That’s the view of agribusiness consultancy, AbacusBio that is underwriting the second Queenstown Agribusiness Symposium in March 2015.

AbacusBio partner, Anna Campbell says after attending the Harvard Agribusiness Executive Seminar in China a few years ago, the company was inspired to organise a comparable event locally so more New Zealand businesses could benefit from the learnings and networking.

The three–day program is facilitated by the Director of Harvard Business School’s Agribusiness Program, Mary Shelman and Professor of Marketing and Associate Dean at UCD Michael Smurfit Graduate Business School, Ireland, Prof. Damien P. McLoughlin, who bring an international perspective, she says. . .

ANZ announces assistance package for farmers affected by Big Dry:

ANZ today announced an assistance package for farmers affected by extreme dry conditions across much of New Zealand’s east coast.

Many areas, including Canterbury, have experienced “severely dry” conditions over the past two months compared with the long-term average, according to Niwa.

“The Big Dry is affecting areas which haven’t experienced extreme conditions like these for many years, so for a lot of farmers this is new territory,” said Graham Turley, ANZ Bank’s Managing Director Commercial & Agri. . .

 

David Jones explains why the red meat sector growth targets are not likely without major reform, and what should be done in 2015 with a sector ‘unable to help itself:

Currently, over 80% of our agricultural produce is shipped offshore each and every year, and over the next decade the sector has big ambitions to double export earnings to $64 billion.

The Red Meat Sector Strategy (RMSS), launched by the Meat Industry Association of New Zealand in May 2011, hopes to achieve growth in the sector of $3.4 billion NZD by 2025, across all parts of the value chain.

The three key influences focused under RMSS are:

• Improving how and what we sell in overseas markets

• Aligning procurement between farmers and processors .

• Adopting best practice production and processing . . .

Economists to discuss challenges of feeding a growing planet . . .

A world perspective on the short and long run impacts of food price changes on poverty will be up for discussion at a major international economics conference in Rotorua next month.

The World Bank’s, Dr Will Martin, will lead the discussion on food price changes and poverty as part of a session on challenges in the agrifoods sector at the 59th Australian Agricultural and Resource Economics Society’s (AARES) annual conference being held in Rotorua from February 10 to 13.

Dr Martin is manager for agricultural and rural development in the World Bank’s Research Group and president-elect of the International Association of Agricultural Economists. His recent research has focused primarily on the impacts of changes in food and trade policies and food prices on poverty and food security in developing countries. His research has also examined the impact of major trade policy reforms-including the Uruguay Round; the Doha Development Agenda; and China’s accession to the World Trade Organisation. . .

 Farmers urged to watch for yellow bristle grass:

 Horizons Regional Council is urging farmers to keep an eye out for yellow bristle grass, an invasive summer weed that spreads rapidly through pasture causing a loss in production.

 Horizons environmental programme coordinator plant security Craig Davey says the grass is already affecting farming in Waikato and is easily transferred from roadside infestations, via stock movement and infested hay.

“Like a lot of weeds, yellow bristle grass is quick to colonise bare ground. Hot, dry conditions, poor machinery hygiene practices and spraying to bare earth can all exacerbate its spread,” Davey says. . .


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