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Monday, September 08, 2003
 

One of the clearer examples of the current confusions about trade and agricultural subsidies is conveniently provided by a CNE report that has been linked by a number of sites. It commits all of the errors of scholarship and analysis committed by naive pundits and journalists.

The report wastes a fair amount of ink in a breathless account of the coming (it's still coming!) Malthusian doom predicted in the 19th century and revived in the 1960s. It cites population growth predictions and current hunger statistics to support gloomy predictions but fails to note that fertility rates have been falling everywhere in the world for decades and have forced population models and predictions to be continuously revised. The expected population peaks go down with every report as modelers using simplistic assumptions are forced by events to adjust their predictions. Similarly, the report fails to note that hunger has been reducing. The current number of food insecure people, perhaps 800 million, is lower than ever though populations have risen. The report notes that the expected population increases will occur in the developing world. Though their estimates of those increases are skewed high and fail to report decreasing rates of growth it is inarguable that there will be significant growth.

What will they eat? The UN expects that the need for food in these developing countries will double in the next 30 years to support increasing population and to improve nutrition for all.

Who will grow this food? Clearly these countries need to grow their own food. It will not be possible for developed countries to increase their food exports enough to make up the shortfall since they are already developed and use the highly productive techniques of modern agriculture. But even if they could the expense of shipping such massive amounts of bulky products across the seas and then the even more massive costs of transporting them inland over bad roads to remote locations would require massive expenditures of resources better used for durable improvements.

How will the LDCs develop their agricultural sector enough to provide for themselves? Where will they get the land, water and fertility? More land will undoubtedly go into cultivation but there isn't enough land to double food production without a steep rise in yields. This will tax the already sparse water supplies in many regions and require massive amounts of industrialization and chemical fertilizers. Enlightened agronomic practices can reduce the amount of imported fertility required to increase yields but not nearly enough.

What will this do to their environments? LDC environments will be massively altered by increased agricultural activity. This is already happening so we can get some indication of the future they will face.

What are the implications of this for trade? LDCs will only be able to export food to developed countries by taking it from the mouths of their own populations. There will be no excess produce for export. It is more likely that developed countries, where populations are stable or falling, will still be required to make up shortfalls. LDCs will have to run as fast as they can just to stay in the same place. The Red Queen was right.

The naive idea that LDCs will be able to lift themselves out of poverty with agricultural exports is preposterous. By the time they have been able to make the investments to improve their infrastructures and so increase productivity their populations will have grown. Luxury goods such as coffee and cocoa that are not grown in developed countries will still be exported, but basic foods such as grains which provide 75% to 90% of the calories for humanity will be eaten on the spot or exported to other LDCs.

The CNE report cites one sensible trade related food issue - developed country barriers to value added products. The classic example is the tariff against candy that prevents Ghana, a major cocoa producer, from manufacturing candy bars for sale in Europe. A tiny portion of the sales price of a candy bar goes for ingredients such as cocoa. Ghana is welcome to that pittance but the major amounts are reserved for European manufacturers. Similar though less compelling cases are cited for textiles and other protected industries.

This is the model for development that LDCs will have to follow. It isn't the export of low value commodities and resources that will lift them out of poverty, it is manufactured goods and services. The most valuable and abundant resource LDCs have is people. Rather than seeking to employ them in inherently low value, low wage activities such as agriculture that have negative labor growth curves as yields increase, employ them in manufacturing and services. This isn't an original or radical idea. India and China as well as other developing countries are already doing this. The various economic tigers of the past decades demonstrated exactly how well it works and are now developed countries.

See previous posts for alternate expressions of these thoughts.

posted by back40 | 9/08/2003 08:58:00 AM

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