Can the G-20 Contribute to More Stable Food Prices?

The 22-23rd June 2011 G-20 Paris meeting was historic. For the first time, the G-20’s agricultural ministers gathered jointly with representatives from main international institutions such as the World Bank (WB), World Trade Organisation (WTO), FAO and the World Food Programme (WFP) in a meeting that resulted in an action plan to deal with the volatility of global food prices. The plan was subsequently presented at the 3-4th November G-20 Cannes summit. Combined with what has been reported as French president Nicholas Sarkozy’s personal commitment in stabilizing commodity prices, this resulted in high expectations ahead of the summit. However, with the looming crisis in the Eurozone dominating headlines, both in the run-up and throughout the summit itself, there has been widespread uncertainty as to whether the G-20 could move on from its function as a crisis-response mechanism to an instrument of global leadership.

By acknowledging that soaring food prices pose a threat to economic recovery and growth, the French presidency brought the issue of food security to the top of the international agenda. Despite the G-20 countries representing 65% of world farmland and 77% of the world production of cereals, the Chicago Mercantile Exchange alone trades the equivalent of 46 times the world’s annual wheat production and 24 times the annual production of corn  – clearly suggesting the need for a comprehensive reform of the current global commodity trading scheme. This was somewhat reflected in the G-20’s ‘action plan’ in which price volatility was described as being largely a result of a lack of transparency and information about daily commodity market stocks and transactions. In the official communiqué, the G-20 acknowledged that ‘price volatility creates significant problems for developing countries’, and stated an intention to ‘develop concrete measures to help the most vulnerable countries and populations’. Measures include the establishment of an ‘Agriculture Market Information System’ database for the agricultural markets, which will include quantitative and qualitative information of the currents stocks of wheat, maize, rice and soya, as well as crop forecasts. The system is intended to co-operate with existing initiatives put forward by the WFP and the World Bank, as well as various regional networks such as the Latin-American ‘New Partnership for Africa’s Development’ (NEPAD), and the ‘Inter-American Development Bank. The initiative also includes the creation of an ‘emergency humanitarian food reserves system’ in order to ‘contribute to a quicker and more effective response to food crises’.

Increased transparency will hopefully make it easier to identify market manipulation, and agreement to exempt “humanitarian food purchases” from export restrictions and import taxes will also make it easier for the WFP to deploy food in acute emergencies, hopefully removing some of the worst consequences of price-peaks. However, as the action plan does not propose any fundamental changes in the modes of production or the systems of distribution, it arguably largely fails to address the underlying causes of soaring food prices. Moreover, the G-20 overlooked NGOs such as Oxfam’s calls to scrap the subsidies for bio-fuels, which in many third-world countries have distorted the markets by making it more profitable for farmers to replace their food crops with industrial crops.

Although the G-20 remains a relatively new constellation without any established institutional capacity, it undoubtedly possesses more financial and political capacity to impact global food prices than any other multilateral body. However, as one sixth of the world’s population are threatened by hunger, it has yet to live up to its potential of playing a leading role in the world. Highlighting this, only one fifth of the 22 million USD that was endorsed through the L’Aquila commitment at the 2009 Pittsburgh summit has been allocated, something that was fiercely criticized by Prime Minister David Cameron earlier this year.

President Sarkozy and France arguably brought food security to the top of the agenda, but it will be up to the upcoming Mexican presidency to lead the struggle to feed the world’s poor.