Taking Action to Ensure Food Security: The Responsibilities of G20 Leaders

September 13, 2011

The number of hungry people on the planet is close to one billion. This is one reason why France has put food price volatility and food security prominently on the G20 agenda. Through their policies and coordinating efforts, G20 governments can do more to stop wild price swings and rising hunger than either of the Rome-based UN food agencies, the World Food Programme and the Food and Agriculture Organization. These agencies have neither the authority nor the resources to respond adequately to the root causes of the global food crisis.

Biofuel and financial policies pursued by G20 governments have played a direct role in fostering food price volatility. These areas need urgent regulatory change coordinated at the global level. In addition, G20 countries are the only bodies with sufficient funds to reverse the decline in agricultural investment in poor countries — a precondition for food security.  

The G20 agricultural ministers met in June and endorsed the components of an action plan to submit to the leaders at the Cannes summit in November. This plan has several positive elements, but it underemphasizes both biofuel and financial regulatory policy reform. At the same time, the role the agriculture ministers mapped out for the G20 as a catalyst for more effective agricultural assistance is weak. Leaders at the Cannes summit should address these limitations in the action plan being presented by the agriculture ministers as a priority.

Biofuel policy is the weakest aspect of the action plan. The G20 countries are the major players in global biofuel production, and many directly subsidize production and/or have blending mandates that encourage investment in biofuels, including the EU, US, Brazil, Canada, China and Australia. These policies are widely seen to distort markets and divert grain from food uses, which can drive up food prices. Yet the action plan only vaguely promises further analysis on the issue, without offering any action to curb the policies that distort food and biofuel markets. Strong commitments could be made to end subsidies to biofuels and remove blending mandates. Short of such strong measures, at the very least agreement could be made to suspend these policies when food prices rise beyond a certain trigger point. Neither is even broached in the action plan, as key players, specifically the US and Brazil, have been staunchly against such policy changes. This reluctance must be overcome if the G20 is to make any meaningful contribution to improving world food security.

Efforts with respect to speculation on commodity derivatives markets are also weak. It is now widely recognized that growing speculative investments in agricultural commodity derivatives have been an important contributor to food price volatility. The G20 is an obvious place to develop collective policy on this issue, because together, the G20 countries host nearly all of the world’s commodity futures markets (the US, Europe, India, China, Brazil and South Africa being the largest). It is important to coordinate regulatory changes to prevent commodity investors from moving to less regulated markets if one country decides to strengthen rules in key areas such as position limits. Although it is welcomed that the action plan recognizes the need for regulatory coordination, the agriculture ministers failed to offer a real plan on this front. Rather, they left policy development to the finance ministers. The G20 leaders must make sure the finance ministers — who generally don’t focus on food security as a primary goal of their work — actually prioritize this issue.

The action plan also comes up short with respect to the G20’s envisioned role in providing agricultural assistance. It is laudable that the plan calls for greater investment in sustainable agriculture, including agricultural research and innovation to enable greater food production in the face of climate change. This part of the plan builds on promises, dating back to 2009, made at the L’Aquila G8 Summit and then endorsed at the Pittsburgh G20 Summit to provide US$20 billion in new agricultural investment. Very little of this money has, in fact, been committed to the multilateral channel that was supposed to receive these funds — the World Bank’s Global Agriculture and Food Security Program. Overall, only 22 percent of the pledged funds have been committed through both bilateral and multilateral channels. The G20 governments need to actually deliver the funds already promised, and to ensure they go toward genuinely sustainable agricultural initiatives.

The agricultural ministers’ plan, while weak in the above respects, places a great deal of emphasis on a new initiative: the Agricultural Market Information System. The aim is to gather and disseminate information on commodity productivity and market transactions in the hope that it will contribute to better functioning, less volatile food and agricultural markets. Promising to gather information is politically easier than tackling tougher issues such as biofuels and commodity speculation, which require confronting powerful vested interests. And it is easier than coughing up $20 billion. But it’s also less likely to make significant improvements in food security. More information about the markets won’t necessarily reduce food price volatility. And we already know that the other measures can make a big difference in addressing food security. Now is the time for the G20 to act on the information that is already available.

Part of Series

Prescriptions for the G20: The Cannes Summit and Beyond

As leaders of the G20 nations prepare for their summit at Cannes, France on November 3-4, CIGI experts offer policy analysis and prescriptions on the most critical issues amid growing uncertainty about the global economy and the G20's effectiveness as an international policy forum.

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