If we don’t slash biofuels and trade tariffs, millions more will starve

IF YOU do the weekly shopping, think back a few months. You noticed the prices of some staples, particularly bread, were rocketing, right? And how did you react? You shrugged. At most, you probably cursed the supermarkets under your breath. The last thing you felt like doing was rioting.

That’s because, in rich countries like Ireland, food represents a tiny percentage — maybe just 10% on average — of our total expenditure. We barely notice a few cents here or there.

In the developing world, it’s a different matter. Haiti’s prime minister has been forced to resign. Violent food protests have erupted across north and west Africa and as far away as the Philippines. Even the leaders of normally stable democratic states fear for their political systems. The head of the International Monetary Fund is prophesying wars.

So what was a minor irritation for us is devastating countries where food accounts for the bulk of a family’s outgoings. Those countries which devote all their arable land to coffee or cocoa production are worst affected.

The figures are indeed alarming. Overall, food prices have risen 40% in the last nine months worldwide; wheat alone has nearly doubled. Nobel economics laureate Gary Becker estimates that a 30% rise in food prices over five years could cause living standards to fall by 3% in rich countries — but a whopping 20% in poor countries. And there’s no sign of things improving for a few years yet. So who or what’s to blame, and how can we get back to the days of cheap food, if at all?

In a sense, the food crisis is nothing new. Unlike in the 1980s, we do produce enough to ‘feed the world’ — all six and half billion of us. But we don’t: a billion still go to sleep hungry each night. The danger now is that millions more will join them as the Third World’s middle classes cut back on consumer goods to buy food, the poor reduce their number of meals and the destitute stare starvation in the face.

In part, these are the victims of global success. The rapid rise of India and China is having some negative consequences. They are moving away from vegetable diet and becoming omnivores, just as we did a century ago. At one time, the idea of a McDonald’s hamburger would have turned the stomach of the average Chinese. Not any more.

Letting people in Shanghai enjoy such dubious delicacies is only fair — but there’s a catch. It takes seven times as much grain to produce the same number of calories from beef as from bread. No wonder demand for foodstuffs is rising even as the global population is stabilising. The price of oil doesn’t help. Modern farming is very intensive and that means lots of fertiliser and tractors, not to mention planes to fly your salad from Israel or Zambia to your local Tesco or Superquinn. Again, competition with India and China for barrels of crude magnifies the problem.

‘Let them eat rice’ isn’t much of a slogan and lowering oil prices is easier said than done. The Australian and Canadian droughts are beyond our immediate control, too.

So must the world’s poor just resign themselves to hunger? Hardly. Some of the factors behind rising food prices are indeed beyond our control but, like most things, the hand of man is at work, too.

One culprit is the policy of adopting biofuels — ethanol from sugar cane and rape seed — here in Europe and, more dramatically, in the US.

Reducing western countries’ dependence on imported petrol seemed like a bright idea. We could have our carbon cake and eat it. Instead of changing our driving habits, we could simply change the fuel source, or so it is implied.

It’s only weeks since Virgin’s Richard Branson was heralding a new era of carbon-free aviation travel by sending one of his passenger jets across the North Sea, its tanks brimming with biofuels.

Trouble is biofuel cultivation needs land — lots of it — and demand for land for fuel production can place pressure on land that is important for conservation as less is available for food production. (Incidentally, the same is true of wind, hydro, solar and all the other alternate sources of energy). The damaging effects are already visible across the Atlantic where one-third of maize production is being diverted into biofuels. Until we can grow wheat in Siberia, that means higher prices of grain for food. EU officials, though — fixated as they are on climate change — appear wedded to the goal of biofuels meeting 10% of our transport requirements by 2020. They need to rethink.

And then there are trade barriers.

We all know about EU subsidies under the common agricultural policy — now extended to biofuels — but it is the world’s poorest countries that impose the highest barriers against trade with each other.

A whopping 70% of the world’s trade barriers are imposed by governments in poor countries on people in other poor countries. Agricultural exports between sub-Saharan countries face an average tariff of nearly 35%, the highest anywhere in the world.

High food prices are a clear and immediate reason to cut tariffs, but that does not mean it will happen. For decades, protectionism has been imposed against the interests of local consumers because of an unholy coalition of western activists and local vested interests. Development charities all too often claim that protecting local industries and agriculture with tariffs will allow them to grow and become competitive — with local consumers, especially the poorest, suffering higher prices.

THE goal of self-sufficiency has done little for sub-Saharan Africa. It is no surprise that crop yields — like income and life expectancy — have steadily decreased across much of Africa since the 1980s. Disturbingly, policy seems to be going in the wrong direction, though: trade barriers are being thrown up — both India and China are curbing rice exports.

But without a push-back on biofuels and a round of tariff-slashing, the medium-term future is bleak. Simply growing more crops is easier said than done. Fallow land is scarce. In the developing world, it is being concreted over; in the west, it is being set aside in the interests of biodiversity.

In the longer term, higher prices will eventually make it profitable again to grow crops for people rather than cars. There are hopes, too, that new varieties and technologies will help crops adapt to capricious climatic conditions. That is little comfort to the starving.

In days gone by, governments and private grain dealers used to hold large stocks in normal times, just in case a bad harvest created a sudden shortage. Over the years, however, these precautionary inventories were allowed to shrink, mainly because everyone came to believe that countries suffering crop failures could always import the food they needed.

If there was free trade, that would make sense. But it has left the world food balance highly vulnerable to a crisis affecting many countries at once — in much the same way that the marketing of complex securities left the world’s financial markets highly vulnerable to a system-wide shock.

Just as we are all seeking to secure our financial assets, stocking up your freezer isn’t as stupid as it sounds.