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PRICE
controls and changes in import and export policies may
address the problems of poor consumers who could no
longer afford an adequate diet for a healthy life, but
some of these policies are likely to “backfire” by
making the international market smaller and more
volatile, the International Food Policy Research
Institute (Ifpri) said.
Dr.
Joachim von Braun, Ifpri director general, said in the
institute’s policy brief titled “Rising food prices:
What should be done?” that “price controls reduce the
price that farmers receive for their agricultural
products and, thus, reduce farmers’ incentives to
produce more food.”
Von
Braun said any long-term strategy to stabilize food
prices will need to include increased agricultural
production, but price controls fail to send farmers a
message that encourages them to produce more.
He added
that by benefiting all consumers, even those who can
afford higher food prices, “price controls divert
resources toward helping people who do not really need
it.”
“Export
restrictions and import subsidies have harmful effects
on trading partners dependent on imports and also give
incorrect incentives to farmers by reducing their
potential market size.
“These
national agricultural trade policies undermine the
benefits of global integration, as the rich countries’
longstanding trade distortions with regard to developing
countries are joined by developing countries’
interventions against each other,” he said.
He
stressed that the increases in food prices have a
dominant role in increasing inflation in many countries
now.
“It
would be misguided to address these specific inflation
causes with general macroeconomic instruments. Mainly,
specific policies are needed to deal with the causes and
consequences of high food prices,” he advised.
Von
Braun proposed the following policy actions to help the
most vulnerable people in the short term, while working
to stabilize food prices by increasing agricultural
production in the long term:
• First,
in the short run, developing-country governments should
expand social protection programs. “This includes
safety-net programs like food or income transfers and
nutrition programs focused on early childhood for the
poorest people—both urban and rural,” he said.
Von
Braun said some of the poorest people in developing
countries are not well-connected to markets and, thus,
will feel few effects from rising food prices, but the
much higher international prices could mean serious
hardship for millions of poor urban consumers and poor
rural residents who are net food buyers, when they
actually are exposed to them. These people need direct
assistance.
“Countries that do not have social-protection programs
in place will not be able to create them rapidly enough
to make a difference in the current food price
situation. They may feel forced to rely on cruder
measures like export bans and import subsidies,” he
said.
He
suggested that aid donors expand food-related
development aid, including social protection, child
nutrition programs and food aid, where needed.
•
Second, developed countries should eliminate domestic
biofuel subsidies and open their markets to biofuel
exporters like Brazil.
Von
Braun said biofuel subsidies in the United States and
ethanol and biodiesel subsidies in Europe were misguided
policies that have distorted world food markets.
Subsidies on biofuel crops also act as an implicit tax
on staple foods, on which the poor depend the most.
• Third,
the developed countries should also take this
opportunity to eliminate agricultural trade barriers.
While some progress has been made in reducing
agricultural subsidies and other trade-distorting
policies in developed countries, many remain, and poor
countries cannot match them.
A level
playing field for developing-country farmers will make
it more profitable for them to ramp up production in
response to higher prices, he said.
•
Fourth, to achieve long-term agricultural growth,
developing-country governments should increase their
medium- and long-term investments in agricultural
research and extension, rural infrastructure, and market
access for small farmers.
“Rural
investments have been sorely neglected in recent
decades, and “now is the time to reverse this trend,” he
said.
He said
farmers in many developing countries are operating in an
environment of inadequate infrastructure like roads,
electricity, and communications; poor soils; lack of
storage and processing capacity; and little or no access
to agricultural technologies that could increase their
profits and improve their livelihoods.
“Recent
unrest over food prices in a number of countries may
tempt policymakers to put the interests of urban
consumers over those of rural people, including farmers,
but this approach would be shortsighted and
counterproductive,” he said.
Given
the scale of investment needed, aid donors should also
expand development assistance to agriculture, rural
services, and science and technology, von Braun
proposed. |
