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Members of the World Trade Organization will be meeting next week in Buenos Aires to discuss the future of agricultural and other trade policies that could have important implications for food security and jobs in developing countries (eventually). And members of the US House and Senate agricultural committees will be meeting through next year to craft a new five-year farm bill that will help shape global markets and determine how much and how quickly US food aid can be delivered to people in desperate need around the world.
Conditions in agricultural markets are not nearly so dire today as they were in the early 2000s, when prices were through the floor, or in 2007-08, when prices doubled and tripled in just a few months. But extreme poverty around the world remains primarily a rural problem and agriculture provides employment for half or more of the people in low- and lower-middle-income countries. And the conditions creating the continuing need for food aid in conflict-ridden areas in Africa and the Middle East are more desperate than at any time in recent memory. That makes the urgency of reforming the US program to make it more responsive and less expensive even greater.
For those interested in these issues and in the implications for the poor and food insecure in developing countries, there are a number of new resources to check out. My recent CGD book, Global Agriculture and the American Farmer: Opportunities for US Leadership, shows why and how agriculture is important to developing countries, and how US (and other) policies affect global agricultural markets. It suggests ways that WTO members could revive their efforts to ensure that these policies are not to the detriment of poor farmers in developing countries. The accompanying brief focuses on a few priorities to make the farm bill less costly for American consumers and taxpayers, as well as the rest of the world, including removal of the in-kind and cargo preference policies hampering food aid deliveries. In other chapters of my book, I focus on US agricultural policies mostly outside the farm bill that undermine global public goods, including biofuels and climate change, and antibiotic use in livestock that contributes to the spread of drug-resistant superbugs.
I also had the pleasure of being a discussant this fall at the launch of two projects hosted by the International Food Policy Research Institute (IFPRI). In an edited volume for IFPRI, Antoine Bouёt, David Laborde, and colleagues provide incredible depth and detail on how the WTO tried to put disciplines on agricultural protection and support in the Doha Round of trade negotiations, with a focus on implications for developing countries. The authors in this volume also look at issues that emerged as a result of the food price spikes in 2007-08, including the role of export restrictions in exacerbating price volatility and of public food stocks and crop insurance in managing volatility.
The second project, involving IFPRI senior research fellow Joe Glauber (also the former chief economist of the US Department of Agriculture) and coordinated by American Enterprise Institute fellow Vincent Smith, takes an in-depth, and critical, look at a dozen farm bill issues. Among those of most interest for developing countries are papers proposing significant reforms to the food aid program (similar to what I recommend in my book and brief) and elimination of import protection and price support for US sugar cane and beet growers.
If you’re interested in the short versions of these resources, the podcast of my conversation with CGD’s Rajesh Mirchandani about my book is here, and video of the two IFPRI events is here and here. The International Centre for Trade and Sustainable Development also has a series of briefings on key WTO ministerial issues here, and will be providing updates from Buenos Aires.
For more on this topic—my colleague Ian Mitchell has written a post exploring key issues where WTO action next week could help prevent future food price spikes. Lots of food for thought!
With a decade since the beginning of the major food price spike in 2007, Ministers gathering at the WTO Ministerial in Buenos Aires this week can make a positive impact on people's lives—with an agreement that will reduce the likelihood and impacts of a food price spike.
Higher global food prices can be helpful to developing countries who are often net food exporters, but unexpected spikes push millions of poor consumers into hunger as supply takes time to respond.
Can Ministers repair the roof while the sun is still shining?
A decade on from the 2007 price spike
It’s exactly 10 years since the beginning of the 2007 global food price spike. That spike more than doubled the price of cereal commodities relative to 2000 and, although exact estimates are difficult, the World Bank estimates this pushed tens of millions into under-nourishment globally. In more developed countries too, these spikes added unnecessarily to inflation, making consumers everyone worse off.
That crisis led to several actions by the G20—it instigated the Agricultural Markets Information System to improve information on markets, and avoid panic-driven export bans; it launched GEOGLAM to use satellite data (I never miss a chance for a GEOGLAM map, see below); and in their Communique Ministers agreed to exempt purchases by the World Food programme from “export restrictions or extraordinary taxes.” These were sensible steps forward and, alongside addressing longer-term structural issues, Trade Ministers in Nairobi helpfully agreed to eliminate subsidies on exports (these usually lower prices, but can push them up when removed sharply, as the EU did in the 2007 spike).
Food price outlook: the sun is shining
Global food prices have been relatively stable and on a downward trend since their peaks in 2011. This reflects the market responding to higher prices, lower energy prices, and increasing productivity. There are no immediate indications (see chart below) of the conflation of factors that led to the 2007 and 2011 spikes.
However, a food price spike is always a possibility. The OECD and UN FAO have suggested “a high probability of at least one severe shock to international markets within the next ten years.” Indeed, with a lower commitment to open trade from the US and perhaps others, in an increasingly volatile climate, disruption in agriculture could more quickly lead to nationalistic, and often foolish, policy responses like export bans that were a (and in my view the) major factor in the previous spikes (for more on the effects of agricultural markets on the poor and food insecure in developing countries, check out my colleague Kim Elliott's new blog post).
What can Trade Ministers do about food price risk?
These would put a ceiling on trade-distorting agricultural subsidies, and reduce the risk that countries regress into a fruitless “arms race” of subsidising their sectors to compete. Agreement would help keep subsidy focussed in non-distorting areas including funds for public good areas like R&D which are important to resilience and productivity.
2. Public stock holding
This is a long-standing problem—India, in particular, want to buy stocks from their farmers at minimum prices which, if above market prices, can be distortive. Whether this exception can be resolved or extended is a key sticking point. WTO rules don’t prevent domestic food aid to the poor or stock-building providing they are at market prices. Still, public stocks are not usually the food security insurance they may appear to be—often, they are just support to the agricultural sector, or perhaps a second-best to social safety nets, rather than being designed to alleviate food shortages and hunger.
3. Transparency and simplification
The United States have proposed stronger action for members that are persistently late in their reporting requirements. The proposed penalties are seen by many as disproportionate and possibly even counterproductive but the aim is a good one. Tunisia have proposed all tariffs should be expressed as a share of product value (rather than complex forms which depend on weight, etc).
4. Reducing fisheries subsidies
It’s clear that by subsidising fisheries, countries are exacerbating the incentives to over-fish, and storing up trouble for later as stocks decline.
In addition to these areas, there are other potential areas of valuable progress—including on Cotton, and on ensuring the Nairobi agreement on ending export subsidies is actionable.
Each of these reforms are valuable in their own right, but the improvements to the food system would also make it more resilient.
Current status of negotiations
Some WTO-watchers think the chances of a deal appear unlikely although there is pressure to make progress under the zero hunger goal (2b) to “correct and prevent trade restrictions and distortions.” There are a number of sticking points, for example, on whether agricultural subsidy limits should be measured in absolute terms, or as a proportion of production. Similarly, India’s public food stock-purchase position has long-been unyielding. Still, as one official put it in Geneva recently, “nearly all successful negotiations look unlikely until the last minute.”
Making global trade relevant to people’s lives
Benign global crop conditions mean that this is a good time to address structural issues. Taken together, alongside their other benefits, an agreement in Buenos Aires would mark another important step forward in addressing the inherent and climate-driven unpredictability of agricultural production and reducing the potential impact and likelihood of food price spikes.
So often, international agreements and G20 negotiations seem remote from peoples’ day-to-day lives. But with an agreements that avoid food price spikes and the hunger and inflation they bring, Ministers attending the WTO have a great chance to demonstrate they are making a difference in people’s lives.
Our new analysis shows that, despite recent improvements, rich countries' intellectual property policies are still worse for development than they were more than a decade ago. Here we look at why these policies became inflexible, and what countries should be doing to let technology flow more freely.
Technological progress, which mostly originates in developed countries, is at the heart of improving social well-being and advancing productivity across the globe. Despite the vital role of technology for development, we show here that after a promising start in 2003, rich countries have since impeded the spread of technology across borders. Even though there has been an upward trend lately, rich countries can do more to allow knowledge to spread, without hampering innovations at home. Smart intellectual property policies such as liberal copyright laws or eased access to health and agricultural innovations will improve the lives of people across the globe.
Stringent protection of innovations at home comes at a price
In our interdependent world economy, productivity advances occur not only through locally developed knowledge and skills, but also from the absorption of expertise and technologies developed in other parts of the world. To name a few examples, just look at how mobile phones and digitalization affect developing countries and how biometrics can make development outcomes more effective, if well designed. For smaller economies in particular, the major source of their productivity growth is the technology and knowledge produced by the leading developed economies. That said, there are often impediments to the flow of technologies from the developed world to the developing world that prevent the latter from fully benefiting from global knowledge. Part of the problem of access is commercial—the lack of trade and investment opportunities. But another is regulatory, such as intellectual property rules (IPR) that prohibit the free dissemination of innovative technologies, or which impose contractual conditions on the utilization of new technological knowledge.
A lost decade? Little progress in intellectual property rules after a promising start
Since 2003, CGD's Commitment to Development Index (CDI) has been tracking the commitment of 27 developed governments to support the spread of technology to the developing world. The CDI has focused on two ways in which the developed economies can affect this process: The first is to help create technologies that foster economic and human development as measured by public and private spending on Research & Development (R&D) and tax incentives for R&D. The second is to help make the technology created more accessible via appropriate IPR.
Independently, the World Trade Organization in 2003 (following the Doha Round) instituted procedures to help ensure that developed country governments were fulfilling their mandate to facilitate technology transfers to the least developed country members. Until that point, it was uncertain whether and how developed country members were complying with the mandate to foster technological development in the developing world. As we have demonstrated previously, it is still unclear whether these rich countries are sufficiently fulfilling those obligations.
While the CDI’s technology component is not a measure of developed country compliance with international technology transfer mandates (nor was it designed to be), the CDI assesses developed governments’ commitments to objectives that are similar in spirit, such as raising the productivity potential of poorer nations. We do this by measuring and analyzing the restrictiveness of the country's patent regime as laid out in its legislation and rules.
Moreover, the CDI heavily weights the role of IPR of developed countries in facilitating—or at least not harming—the developing world’s access to global knowledge goods. As the chart below shows, since 2003, there has been a downward secular trend in developed country commitments to the spread of knowledge and technologies. The rating shown is for the 27 countries as a whole. However, since 2014, their commitment to the global spread of technology appears to have increased again.
This is a good sign. But there is scope for greater efforts on the part of rich country governments. The recent efforts are still shy of the dedication to technological development shown by developed country leaders back in 2003.
How supporters for a free internet became advocates for development
Much of the trend in the CDI’s technology component is due to changes in IPR. During the 2000 decade, developed economies like the United States, Japan, and the European Union pursued regional free trade agreements with developing country partners that included more stringent intellectual property provisions—especially provisions that limited exceptions to IPR. For example, developing country governments were required to limit the use of compulsory licensing, whereby intellectual property holders could be compelled to license their technologies to third parties if the technologies were not widely supplied in the market or licensing fees were too prohibitive. Other provisions tended to limit “fair use”; namely the ability of the public to use certain copyrighted works in certain ways and conditions without obtaining permission. Developed economies also pursued global agreements like the Anti-Counterfeiting Trade Agreement (ACTA), which attempted to raise enforcement standards. Individual countries, like the United States, pursued legislation like the Stop Online Piracy Act (SOPA) which sought to more heavily regulate internet service providers and search engines.
The public and user rights groups pushed back against such legislation and international agreements, regarding them as undermining internet freedom, and as unduly restricting fair use and other intellectual property exceptions. Consequently, during the 2013–2017 period, developed country governments appeared to retreat somewhat from further reforms. This helped, by default, to raise their CDI scores since less stringent regulations better enable technologies to flow to the developing world.
At the same, developed country governments were also more proactive in enabling the flows of technological knowledge. The European Union issued a “stay” on the patenting of plants and animal subject matter, while New Zealand raised the bar for approving such patents. This should benefit the developing world’s access to medicines and agricultural innovations. Canada, France, Germany, and the UK helped make digital technologies more accessible by tightening standards for software patentability. In 2015 Australia created more exceptions for copyright law, potentially enabling greater scope for learning-by-doing and imitation.
Help innovations to arise and spread, even beyond borders
Intellectual property regulations have effects beyond national borders. While they support incentives for innovation, they do affect how innovation spreads across borders. Developing economies typically require standards of IPR appropriate for their technological needs. Realistically they are not likely to fulfill their needs for combating poverty, disease, and fragility to environmental shocks by raising their intellectual property standards to those of developed economies. This would not increase local R&D, not with their limited technological resources, nor stimulate global R&D, given their relatively small market size. If anything, access to goods may be hampered if higher intellectual property standards raise market prices. Instead, developed governments should continue to fill the global R&D gap by contributing resources for R&D and design regulations—with flexible exceptions and exemptions—to support the wide diffusion of technologies to the developing world.
Walter Park is a professor of Economics and the PhD program director (Economics) at American University.
Germans have given Chancellor Angela Merkel a fourth term as chancellor, but once again without a parliamentary majority. It seems likely that Merkel will now try to negotiate a black-green-yellow “Jamaica coalition” (referring to the parties’ colors) with the Greens and the pro-business Liberals replacing the Social Democrats as coalition partners. Despite the gain in vote for nationalists, our analysis suggests the Jamaica coalition could actually strengthen Germany’s role in accelerating global development, as well as benefitting Germany.
In this blog, we look at the what the Jamaica coalition means using the framework of our Commitment to Development Index—which ranks rich countries on aid, migration, technology, environment, trade, finance, and security.
Germany’s starting point on Commitment to Development
Overall, Germany ranked fifth (out of 27 countries that we assess) and first on migration, largely because it has accepted so many refugees in recent years. We counted migrants as “1” when they came from the poorest country (Democratic Republic of Congo) and “0” when coming from the richest country (Norway). This method quantified that Germany lifted the equivalent of “880,000 poverty weighted migrants” out of extreme poverty last year! But a ratio of one new migrant for every 92 Germans, contributed to the rise of the far right nationalists (AfD) who have become the third largest party in parliament. Regardless of the election results, mounting public pressure will reduce migration. But a poll of economists thinks the Jamaica coalition is actually more migration-friendly than a continuation of the previous grand coalition would have been.
On aid, Germany met the international commitment of 0.7 percent of national income (GNI) on aid (overseas development assistance) for the first time in 2016. This included high expenditure on hosting refugees—but to maintain 0.7 when fewer refugees arrive, overseas development assistance would have to ramp up quickly.
On environmental policies, high emissions per capita mean Germany might not meet the Paris agreement commitment to reduce emissions by 40 percent by 2020. The global poor will suffer the consequences: climate change might push 100 million people back into poverty by 2030. This is partly due to Germany’s poor policy choices, like burning and subsidising fossil fuels. Both the Greens and Liberals want to phase out these subsidies.
On technology more widely, there has been an increase in overall R&D spending to 0.88 per cent of GDP, but this is still lower than in many other countries. Spending more to create new technologies like mobile phones or biometric IDs can transform development and is a perfect example of investing in global public goods. All major parties want to increase R&D spending to 3.5 per cent of GDP by 2025—a “Jamaica coalition” will not change anything significantly here but this is a positive direction for development.
Germany’s trade policies have a significant impact on developing countries. Free trade agreements such as the EU’s “everything but arms” initiative give poor countries tariff-free access and have the potential to dramatically reduce poverty. For instance, a recent natural experiment suggests trade deals such as these can lower infant mortality by about 9 per cent.
On security policy, Germany has been criticized by the US for failing to spend 2 per cent of GDP on defence. This figure includes spending on UN peacekeeping, for which Germany spends only 0.03 per cent of GDP—less than the OECD average, and this at a time when the UN peacekeeping budget is facing deep cuts. This is a matter of real concern because security and development are closely interlinked—for instance, one study suggests that civil wars decrease GDP per capita by 17.5 percent. Merkel’s conservatives want to double defence spending to reach 2 percent of GDP by 2024. The Liberals also want to increase defence spending, unlike the Greens, who want to specifically focus on increasing support for UN peacekeeping.
Overall then, taking the policy commitments of the Liberals and Greens and adding them to Merkel’s conservative bloc in a “Jamaica coalition” could bode well both for Germany, and development beyond aid.
How well do your country's policies make a positive difference for people in developing nations? That’s the question CGD seeks to answer each year in our Commitment to Development Index (CDI). It’s a ranking of 27 of the world’s richest nations based on seven policy areas: aid, finance, technology, environment, trade, security, and migration.
The team behind the CDI, deputy director of CGD Europe Ian Mitchell and policy analyst Anita Käppeli, join me this week on the CGD podcast to discuss why these rankings matter and how countries stack up.
In first place this year is Denmark, followed by Sweden, Finland, France, and Germany. Greece, Japan, and South Korea rank at the bottom—though South Korea actually ranks first on the technology component.
Among the countries in the middle are the UK, tying with the Netherlands for 7th place, and the US, all the way down at 23rd. In the future, how might these scores be impacted by the changing politics of the two nations?
“On Brexit, there’s real potential for this to affect the CDI score,” Mitchell tells me in the podcast. “The UK will take control of its own migration policy more fully and it will have its own trade policy and it will take control of agricultural policy form the EU. All of those things feature in the Commitment to Development Index.”
As for the the Trump Administration’s America-first approach, Mitchell says, “It’s surely in the interest of countries to see other countries developing to reduce the security risk, to make sure there’s lower risk of disease emerging . . . and the CDI is a framework for prioritizing action on that.”
Overall, Käppeli tells me, the CDI is a reminder to countries that “policy coherence is an issue; that they should not pursue policies in [only] one field—for instance, give a lot of aid, but then close the boarders for products from developing countries.”
“The CDI is holistic,” Mitchell adds, pointing out that the CDI’s focus on policy is “complementary” to the Sustainable Development Goals’ focus on outcomes: “If you think about how we’re going to achieve the SDGs, then looking at the CDI [is] a great way to do that.”
How well do your country's policies make a positive difference for people in developing nations? That’s the question CGD seeks to answer each year in our Commitment to Development Index (CDI). The team behind the CDI, deputy director of CGD Europe Ian Mitchell and policy analyst Anita Käppeli, join me to discuss why these rankings matter, how countries stack up, and how their scores may be impacted by the shifting political environment.