WTO Head Says Trade Is Key To Food Price Stability

WTO Head Pascal Lamy Says Trade Is Key To Food Price Stability

As food prices and climate change spread alarm in many circles, we asked Mr Lamy - previously European Trade Commissioner and appointed head of the Geneva based WTO in 2005 - what role if any the WTO can play. He said rich countries must be aware of the impact of agriculture subsidies on the third world, adding prices are rising because the world needs a better fit between rising demand and supply. He said that trade acted as "belt" between the two.

He was in parliament on 29 May to brief MEPs on the trade and climate committees. One of Mr Lamy's key responsibilities is to conclude the Doha Development round of trade talks which were launched in 2001 and were due to finish in 2005. Here we asked him his opinion on a few issues that face the world.

How can the ongoing negotiations in the WTO and in particular on agriculture - affect rising food prices and the ensuing global crisis?

The food crisis has very different components. The key is poverty - something that is not new, alas. The higher prices make it even more difficult.

What the WTO may do is to be useful in getting a better fit between demand - which is stronger than before, especially grain consumption - and supply, especially the ability of some countries, notably developing countries, to increase production. The gap between the two is trade.

But it is obviously necessary that rich countries understand that the subsidies they pay damage production system in some Third World countries. They must accept additional discipline. This has been evident for a long time: this crisis puts it on the agenda at an important time in our negotiations.

The problem of access to natural resources is increasing international tensions (for example China in Africa, the problem of water in the Middle East and so on). How can the WTO contribute to a more balanced sharing of resources that are increasingly sparse?

There are plenty of ways to do that. Moreover we are trying to do it - it's part of the objectives enshrined in the Charter of the WTO, which dates from 1994: the opening of trade to encourage sustainable development.

The first way to do that is "a bit more trade rather than a bit less". If the Egyptians had to produce all the cereals they eat, which today is very expensive, there wouldn't be a drop of water in the Nile! So, trade, from time to time, is a way to use natural resources, where they are most readily available.

In addition, there are lots of things we can do with tariffs: encouraging environmentally friendly goods through customs duties, further opening the environmental services market. There are plenty of Third World countries which now have the capacity to do that.

Finally, we can go with an agreement that one day perhaps, I hope, will return to post-Kyoto and issues of climate change. These are not being negotiated at the WTO...But it is clear that the day there is an agreement that will succeed Kyoto - and it will surely be broader and probably more demanding than Kyoto - we will have to adjust. As it is, roughly, the same countries that negotiate the rules on climate change and trade rules, a priori that should not be major difficulties.

So an increase in trade does not necessarily mean increased pressure on natural resources?

In some cases this is true, but there are instances where it is exactly the opposite! Take the case of "foodmiles" (the distance food travels from field to plate), for example, which explains that roses from Kenya are not good for the environment because they are transported by air. It has been calculated - and in fact the European Parliament has done this itself and understands that roses from Kenya are better in terms of climate change then greenhouse roses that come from another EU country. So we must be wary of evidence and look at all the calculations.

There are cases where the price of energy is not at a good level from the viewpoint of climate change, where trade has a bad impact on climate change. And there are plenty of other cases where trade has a positive impact.

ENDS

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