Report of the
High Level Round Table on Agricultural Trade Reform
and Food Security
Rome, April 13^th, 2005

Introduction

The performance of developing country economies in light of the liberalization reforms of the 1980s and 1990s, and especially the impact of these measures on food security and poverty, are being widely debated today in the context of the ongoing WTO agricultural negotiations under the Doha Development Agenda, and the challenges inherent in meeting the Millennium Development Goals. It is in this context that a High-Level Round Table was organized by FAO to coincide with the 65^th Session of the Committee on Commodity Problems (CCP) and the 19^th Session of the Committee on Agriculture (COAG). The Round Table provided a forum for discussing these issues and sharing experiences related to the process of agricultural trade liberalization and its impact on food security and poverty.
The High Level Round Table was organized in two parts, opening statements by the Director General of FAO and a panel of invited speakers, and statements by delegations participating in the meeting. Opening statements were made by the Chair of the Session, the Honourable Mallam Adamu Bello, Federal Minister of Agriculture and Rural Development, Federal Republic of Nigeria on behalf of the President of Nigeria, by Dr Jacques Diouf, Director General of FAO, by Dr Supachai Panitchpakdi, Director General of WTO, by His Excellency Sultan Bin Hassan Al Dhabet Al Dosari, Minister of Municipal Affairs and Agriculture, State of Qatar on behalf of the Prime Minister of Qatar, and by Mr Ivan Demchak, First Deputy Minister of Agricultural Policy, Ukraine. There were also statements by 17 delegations.
FAO prepared a brief background document on the following three key questions that touch on the most controversial aspects of the ongoing policy debate.

1. Under which circumstances can protection of the agricultural sector be justified to enhance and ultimately ensure food security?
2. Does agricultural trade liberalization threaten food security and the goal of reducing rural poverty?
3. Which national policies are appropriate to ensure food security during the transition towards freer agricultural trade?

The debate

The opening statements addressed the importance of trade to food security suggesting that past as well as present experience show that food security is best achieved in an economically integrated and politically interdependent world. In such a world, the burdens of short-term fluctuations and long-run structural change are reduced as deficits in food production in one region or country can be covered by imports, i.e. the use of surpluses from other countries or regions. Global stability and peace was cited as essential to achieving food security, and stable trading relationships were presented as being vital for both food security and global security.
Although there seems to be broad agreement that trade liberalization fosters efficiency and economic growth in the longer run, the immediate results for the poor and food insecure are mixed and it is this that seems to contribute to disagreement about the effects of further trade reforms.
Given that global supplies are sufficient to meet global needs, it was recalled that hunger and malnutrition result more from inadequate incomes than from inadequate food supplies. The Rome Declaration and Plan of Action of the World Food Summit indicated that trade is one of the factors determining food security, as it can stimulate the economic growth that increases incomes and provides access to food through imports.
The negative immediate effects that the poor might face as a result of trade policy reforms were recognized as needing particular attention. However, the appropriate response recommended was not to abandon trade or the reform process per se, but rather to implement reforms in a planned manner, recognizing that there is no one policy set that will be appropriate in all contexts, and that in some cases it might be appropriate to provide support to alleviate the hardships of the poor. The experience of China and India was pointed to as countries where opening of their economies and introducing economic reform policies led to reduced poverty and increased food security. It was also pointed out that these countries had put in place, before opening their economies, the necessary policies to ensure the development of strong institutions and markets to enable them to benefit from greater openness.
Food security is very important for collective security, i.e. for peace. Conversely, peace and good governance are prerequisites to achieving food security and this should be more clearly recognized. Moreover, food security will not be achieved through trade liberalization only, but requires a shared purpose and collective will to solve related adjustment problems. FAO’s work on the Right to Food was cited as an important dimension of the efforts to increase food security and it was suggested that it should be better integrated into all of the work of the institution.
In terms of the three specific questions of the debate, views expressed reflected the tension that exists between pursuing the longer term goal of a more open trading system to which most aspire, and the shorter term negative impacts on poverty, rural development and food security that greater openness can cause:

1. Under which circumstances can protection of the agricultural sector be justified to enhance and ultimately ensure food security?
Given the importance of the agriculture sector to economic development and food security in many countries, it was suggested that protective measures could be required for a range of reasons and that different levels and forms of protection would be appropriate at different levels of development.
Arguments brought forward for protection included:

• Situations in which a country’s agricultural sector has to compete with imported products from countries that subsidize their farmers. In this context, protection may be justified as a safeguard against import surges. Smallholder agricultural producers in developing countries with widespread rural poverty are often especially vulnerable to unfair competition and may require greater levels of support and protection
• Situations in developed as well as developing countries, in which agriculture performed multiple roles, in addition to production of food and raw materials, for which it did not receive direct compensation; Others cautioned that protection can have adverse effects, which include:
  Protectionist policies that distort trade can curtail agricultural exports of countries where food can be produced at lower cost. This is particularly important for net exporting developing countries.
• Subsidies and other measures to induce production often benefit the better-off members of the farming community.
• Border protection and resulting higher internal prices have adverse effects on food security as they hit poorest consumers the hardest and serve as a regressive tax. They thus reduce the purchasing power of the poor and undermine their food security.
• Protection tends to promote food self-sufficiency, and not necessarily food security. Food security is better served by policies which promote food self reliance, which maybe rather compatible with increased openness and trade liberalization.

2. Does agricultural trade liberalization threaten food security and the goal of reducing rural poverty?

Again, views expressed differed in the extent to which trade liberalization should be seen as a threat or opportunity. Some delegates replied to this question suggesting that trade liberalization was not a threat, but rather an opportunity, for the following reasons:

• Trade liberalization opens opportunities for countries. Reducing tariff peaks, tariff escalation, trade distorting support and export subsidies opens up trading opportunities between both developed and developing countries. In 2003 developing countries sold 46 percent of their exports to other developing country markets and therefore, developing countries would hurt each other by maintaining barriers to trade.
• Even if there was a threat to food security from trade liberalization, the ongoing WTO negotiations would create provisions for Special and Differential Treatment (SDT) measures that should help to reduce any negative impacts to food security during the transition period. In this regard, possible recourse to sensitive products, special products and the new Special Safeguard Measure (SSM) could provide adequate flexibility to countries to pursue appropriate agricultural policies in a more open trading environment.
• Domestic development programs to ensure food security was argued should not to be affected by trade liberalization if they are not trade distorting since the Green Box of the AoA allows for these measures.

By contrast, other participants stated that trade liberalization was indeed a threat, arguing that SDT and related measures may not be sufficient to guard against potential negative impacts of trade liberalization. Arguments for this position included the following:

• Opening domestic markets may lead to large scale dumping and threaten food security in the importing country when it undermines the capacity for domestic production, (hindering productivity increases). This in turn reduces agriculture’s potential role in generating wider rural development and agricultural growth.
• Greater openness to cheap imports may be a threat not just to agricultural producers, but to actors in all stages of the marketing chain
• Reducing protection and the resulting decline in surpluses on world markets may lead to increases in prices of food items and thus impact negatively on the terms of trade for food importing countries. Reduction in export subsidies could further exacerbate this effect. As a result, food importing, including food aid receiving countries could be worse off due to trade liberalization.

Generally, there was wide consensus that trade liberalization creates both opportunities and challenges and has winners and losers. It is important to recognize this. Appropriate phasing of reforms is critical to ensuring that countries don’t prematurely expose their agriculture sectors to greater competition without adequate institutional mechanisms to safeguard against potentially negative impacts. Trade liberalization is not a development strategy by itself and the impact of increased competition should be addressed, especially when it has a negative effect on local production which is well documented.

When the process of trade liberalization begins, in some circumstances, compensatory policies should be in place to accommodate the transition of the losers to more viable and sustainable situations, especially focusing on vulnerable groups within countries.

Vulnerability to crises is more apparent in countries at lower levels of development, where it may be difficult to manage the threats from greater openness.

Trade reform per se is not the real issue, rather the issue is under what circumstances it is appropriate, and how better it can be managed in order to achieve national objectives, including food security.

3.Which national policies are appropriate to ensure food security during the transition towards freer agricultural trade?

It was agreed that no one policy fits all, and the importance of domestic policy reform and institution strengthening to ensure an enabling environment was stressed. Experience shows that appropriate liberalization policies depend on specific contexts and situations. The most important aspects mentioned in this context included the following:

• While the eventual longer term goal is freer agricultural trade, there are certain interventions in domestic markets and at the borders that might be necessary before liberalization and during the transition phase. Sequencing of liberalization policy is important.
• Pro-poor policies should take centre stage. Important measures cited in this regard were - increasing infrastructure in rural areas, including providing good roads that facilitate marketing; and building on successful experience to provide low cost, high yield technology. Policies for different size farmers and for different degrees of government dependence on revenue from customs duties would need to be addressed.
• In addition to identifying appropriate policies it is essential to promote policy coherency both within the policy framework of individual countries and across international assistance agencies, especially the Bretton Woods institutions. For example, the impact on the terms of trade of net food importing countries when subsidies are eliminated needs to be recognized and addressed. This response requires the involvement of the international development and financial agencies. The “aid for trade initiative” under consideration by the World Bank was cited as important in this regard.
• The multiple roles of agriculture– economic, social, environmental- and the importance of family farms should be recognized and reflected in policies designed to promote food security and rural development
• Regional integration of agricultural and trade policies should be pursued to promote synergies and make use of comparative advantages and complementarities between neighboring countries.

Conclusion and implications for FAO work

There was considerable convergence on the following issues–

• trade and trade reform are vital for economic growth and development in the long run
• accompanying programs are needed to be targeted to the losers and vulnerable communities
• rules are needed to manage trade and must be more closely linked to development objectives
• a level playing field is required to facilitate the entry to trade of weaker players
• unilateral liberalization is generally not appropriate in the current trading environment.

Further analysis is required to understand and present the evidence on a range of questions related to the above issues –
1. Regarding the justification of protection :

1. is a minimum level of self sufficiency needed for food security ?
2. where agriculture provides multiple goods is there a need for government support ?

2. Regarding the possible threat to food security resulting from trade liberalization:

1. how clearly can winners and losers be identified ?
2. how to better establish the link between trade liberalization and increased/or decreased food security ?
3. how best to reduce distortions outside the country undermining the domestic agricultural sector ?
4. what measures are needed to protect Low Income Food Deficit Countries (LIFDCs) and Net Food Importing Developing Countries (NFIDCs) that may suffer as prices of food imports increase?

3. Regarding the choice of appropriate policies

1. what package of policies is best for which stage of development ? how best to sequence and manage policies ?
2. what is the role of state at different stages of the development of the agriculture sector ?
3. what is the link between good governance, political stability and food security?
4. which policies best increase agricultural supply side response capacity ?
5. what are the most effective transition and compensatory policies?
6. how best to build capacity for participation in ongoing agricultural negotiations?