Hon Tim Groser
18 May 2012
Embargoed until 5pm NZT
Speech
Address to the Inter-American Development Bank-International Food and Agricultural Trade Policy Council
Washington DC
US Trade Representative Ron Kirk, distinguished guests
It is always a pleasure to address these two important institutions, the Inter-American Development Bank and the
International Food and Agriculture Trade Policy Council.
I was honoured to be invited to join the Council in 2005 when I retired from being the Chairman of the WTO Agriculture
Negotiations and to join such a great group of people who have made such a contribution in research, agribusiness or
public life, to a more rational approach to agriculture policy.
Of course, in keeping with the IPC tradition, I had to resign when I became Minister of Trade for my country. But I
continue to follow closely your research and other activities and commend you for it. I also want to acknowledge the
support given to the IPC by our private sector funders, without whose financial support, the IPC would not exist.
The IPC is not, and never has been, an extreme organisation pushing a hard-line, über-liberal view of markets. We have
always had in our membership people who have had years of experience dealing with agriculture in countries with pockets
of high protection and subsidies.
We all understand why. Agriculture is about as sensitive an issue as you can find. There are deeply held and often
conflicting views in our various countries and policy will inevitably need to be shaped taking those views and interests
into account. The important thing, however, is to have what we call ‘fact-based’ analysis and policy and that is where
the IPC can assist.
Food Security: The Political Dimension
Nowhere is this clearer than in the subject we are addressing today – food security. Nothing, other than peace and
physical security, trumps food security; and in the worst of times, they may not be distinguishable. War and famine have
been only too frequent bed-fellows. The darker shadow of the 20th Century, as well as its fantastic achievements, still
hangs over us today, influencing our thinking on food security.
Food security, one could say, is therefore non-negotiable. It sits at or near the absolute apex of human concerns. The
problem is too often food security has been interpreted as one and the same thing as trying to produce all your own
food. The massive distortions this has created, the huge loss of welfare, and (I would argue) occasional food crises
this mentality has produced are directly linked to this misaligned view.
I suppose the idea of not relying on other countries for your food is rooted in our DNA. In mankind’s early history,
when we were all hunters and gatherers, individual families, tribes and other communities would have gathered all their
own food. Presumably, limited trading between families, tribes or villages would have taken place as our ancestors
discovered that some communities had access to foods in abundance and others had shortages.
They would also have discovered some were more efficient at hunting or gathering than others. One could say they would
have discovered the efficiency gains of trade in agriculture goods, and food would have been exchanged for weapons and
other non-agriculture goods We can be confident that our ancestors would have worked this out, thousands of years before
Ricardo and Hume systemised the theory of comparative advantage.
But we can assume that in these brutal and warlike conditions – recall that the average life expectancy of a male in the
Neolithic Age was 20 - the idea of relying on others for your food, would have been ‘challenging’, to say the least.
Even when classical Rome was at its height thousands of years later, life expectancy was still only between 28 and 30 –
about the same as Māori life expectancy in 1800 prior to the non-Polynesian migrants arriving in New Zealand in large
numbers. These are facts (or at least professionally derived estimates), not political statements.
When the first country moved from an agrarian society to embrace the industrial revolution (the UK), it became a
tradition for the new industrial working class to have access to gardens – and not necessarily co-located where they
were housed. That tradition still exists in the United Kingdom today, as keen watchers of Food TV will be well aware.
I am myself a recovering Food TV junkie. I just wish some of the programmes were a little more informed about sound
economics, real understanding about the carbon cycle as opposed to junk concepts like food miles and demonstrated a more
scientific base to food safety issues which understands that local food, organic or not, can also poison people and
frequently does. But Hell will freeze over first. You would certainly not want to hire me as a TV programmer – I would
drive your ratings into the dust in a matter of months.
My hunch is that at the start of the Industrial Revolution, this need to ensure the new phenomenon of the urban
industrial worker could continue to grow food was powered in part by income insecurity. But I suspect it was also
influenced by a deeper psychological need to continue to produce at least some of your own food.
After all, the first workers to fill the so-called ‘Satanic Mills’ of Lancashire, Manchester and the first industrial
cities of the World were former agriculture workers. It is the same thing in China today. The people who arrive from
rural China to try their luck in the great new mega-cities of Dalian, Shenzhen, Guangzhou, Chongqing, Wuhan and Chengdu
are undertaking the same personal journey. I suspect these people too find the idea of buying all their food, an unusual
concept after centuries of their families and ancestors growing their own.
My professional life has been dominated by my country’s fight to liberalise markets for our high quality, safe food
produced efficiently and today I would add, generally less carbon intensive processes. But I have always understood the
fear of countries losing their capacity to produce their own food. And I have always suspected this was, deep down, a
reflection of a fear that is based on our historical DNA.
The Food Challenge for the 21st Century
We are forever bombarded by the metrics:
· World food production must increase a ‘staggering’ 70% by 2050 to feed the 2-3 billion extra people on the planet;
· The rate of growth of cereals production (wheat, milled rice and coarse grains) has been in downward decline for some
time now, with the growth rate having fallen from 3.7% pa in the 1960s, to 2.5%, 1.4% and 1.1% in the subsequent decades
of the 20th Century; intriguingly however, recent data suggests a reversal of this decline. Since 2000 total food
production in both real and per capita terms has increased significantly. I am certain this is not unrelated to higher
average real prices.
· There is pressure on resources fundamental to food production – arable land, water in particular. China, with 23% of
the world’s population and 9% of the world’s arable land has huge competing pressures for its water. In India, some 94%
of all land suitable for arable production in India is already in production; satellite data indicates that ground water
has been falling recently by 2-3 cm per annum. To put the latter point in plain terms – farmers and villagers are having
to dig deeper and deeper for their wells.
· Climate Change will, according to the IPPC, result in some large shifts in water supply. Given that 70% of the world’s
supply of fresh water is used in producing food, this is a non-trivial point. The negative impact on India will be
particularly difficult according to their projections.
It all sounds impossible. Well, if not impossible, it certainly provides great speaking material for after-dinner
speeches by those who adore apocalyptic thinking.
My core point in this speech is exactly the opposite. We can meet all these challenges, provided minimum rationality
prevails. Specifically, I would highlight the following four central points.
First, the issue of ‘food poverty’ is fundamentally an income, not an agriculture production problem. Singapore has no
farms. As far as we know nobody starves in Singapore.
Second, the problems around food security are localised, not global. We are perfectly capable, for example, of
increasing food supply by 70% over the next 40 years – we increased global food supply by over 140% in the 45 year
period to 2005. Can we achieve about half the increase in production we achieved globally over the last 4-5 decades?
Sounds rather modest to me as a global goal.
Third, it is completely irrational to assume current technologies applying to any of these issues. This lies at the
heart of the Malthusian fallacy. On the contrary, we should assume at the minimum the same creativity and innovation of
the past 40 years and that is probably very pessimistic. With billions more people likely to received elite education
and all linked around the world in their specialisations by the internet, I think it is far more likely that the next
two generations will accelerate invention and innovation.
Apply that historically to agriculture and you can see the point. One calculation I have come across is that if the same
average agriculture yields that prevailed in 1961 (hardly ancient history) prevailed today, we would have had to farm 82
per cent of the land area of the Earth to feed the current population of the planet, not the 38 per cent that is used in
ploughing, cropping or grazing.
There is an issue, however, here: agriculture R has not kept up with economic growth in several major developed and developing countries. I know the current US
Administration – and I want to acknowledge the presence here of a long-standing colleague of mine, Ambassador Siddiqui,
USTR Chief Agricultural Negotiator - is very much aware of this as is Secretary of State Hilary Clinton.
I also want to add a brief advertisement for our own international research collaborative exercise – The Global Research
Alliance on Agriculture Emissions. This is a very successful international initiative, strongly supported by the United
States and USDA in particular NZ put it together organisationally and politically, the United States provides the
muscle. Good combination. Agriculture scientists from over 30 countries are now split into five core groups developing
research projects.
Our aim is simply stated, but difficult to achieve: to ramp up internationally coordinated research into producing more
food with less emissions intensity. At the end of the day, highly emissions intensive food is a mark of economic
inefficiency, as well as a huge contributor to global anthropogenic greenhouse gases. Emissions from food contribute 14%
of global emissions – about the same quantum of emissions as every car, truck, train, plane on the planet. I know that
after the apparent chaos of Copenhagen, few want to talk about climate change at high political level. But we have to do
something here, and this is what we in New Zealand are focussing on.
Fourth, it is vital to let markets work better, domestically and internationally. This is the way to resolve the paradox
that in aggregate these issues around food security can be easily managed, given that the problems are localised, not
global. The role of markets here is simply crucial. This is not an ideological point. It is a practical reality. It is
the role of markets to respond to resource constraints, local shortages (both temporal and permanent) and to drive
productivity increases.
Think of some of the worst famines in the last 50 years. I have in mind, the huge population losses in China during the
Cultural Revolution, localised severe famines in parts of Africa, the tragic starvation of hundreds of thousands in
North Korea. Poverty or central planning, not global food shortages (there were none), allied, at least in the first and
last case, to deliberate policies of economic autarchy, caused the famines.
As World Bank research so clearly illustrates: the vast majority of the very poor today – around 1 billion people - live
in conditions of quasi civil war or conditions of deep physical insecurity. Properly targeted emergency food aid is what
they need, but let’s not pretend that is real and sustained development assistance. For the rest of the world’s poor,
freer agriculture trade policy to establish better functioning global food markets is absolutely part of the answer. I
understand there will be a thousand voices who claim to speak in the name of the poor who will find that difficult to
accept. They will be proven wrong as they have been proven wrong in the past.
There is a particular issue around food price volatility. The trend in the last ten years has been higher prices, but
accompanied by more volatility. I do not want to delve into this complex matter which has attracted a high degree of
international attention at recent G20 meetings amongst other fora. There are many drivers – USDA has done some excellent
research into the clear links between rising oil and food prices for example.
There are some politically understandable but very controversial export restrictions that have undoubtedly transferred
some of the burden and heightened international price volatility.
I will just stick to one simple precept: if we are to use international food markets to meet the more sophisticated food
security needs of the vast middle class of the emerging economies – and we must – you cannot turn the trade tap on and
off. For exporters like us, Australia, many of our Latin colleagues and the United States, we need stability of market
access to invest in food for export. And what’s more: once we have a flourishing commercial stake, we start to invest in
agriculture production in the importing country. Investment follows trade. We can and will do both since our
intellectual property in agriculture is far larger than our exporting capacity.
I recall clearly several requests we received in 2009 from some markets with very high protective barriers. Facing deep
disturbances at home from rapidly rising prices, they wanted large volumes of food and they wanted it ‘now’. We did what
we could for political reasons, but we could not do much – we had reliable customers who had signed up to trade
agreements and our customers come first.
Second, it is simple economics that illiquid markets fuel volatility. A small and thin international market relative to
highly protected and large domestic production is a recipe for volatility. I come back again to the need for an
increased role for markets.
Declaration of Interest
Let me declare, not a self-interest, but a strong New Zealand interest in this policy prescription. Of course we, as a
significant exporter of sophisticated food, fibre and energy products and services stand to benefit from this approach
over the next 40 years. And we fully expect to benefit.
The current fragile international economic situation notwithstanding, we are very bullish about our future in the 21st
Century. It is the consequence of these underlying drivers and the recent negotiating advances we have enjoyed that
allow us access to the markets of emerging Asia.
I think of us more and more these days as a virtual water exporter. Seventy per cent of the fresh water on the planet is
used in producing food. So our role in the world, at least in part, is to convert, through applied science and
entrepreneurship, our natural abundance of fresh water into high quality food and beverages to the giant emerging
economies that face such large challenges on water. NZ does other things too very competently, but this lies at the core
of our exporting future.
By importing dairy products from NZ you could say China is rationally out-sourcing what would otherwise be additional
huge investments in water infrastructure. I see a similar model here for our trade in energy-intensive goods with the
emerging economies, given our abundance in renewable energy: some 80% of our electricity comes from renewable energy,
wind, hydro and geothermal and we plan to do more. However that is another story, rooted again in rational economics and
sound, moderate climate change strategies. But that’s another speech.
That middle class of the emerging economies – and we use rather modest definitions of income in that phrase – has by and
large gone beyond the primary issue of physical hunger. But millions will still be short of real food security in the
sense of the definition by the World Food Summit in 1996. Let me read out their definition, since I think it is a great
definition:
“Food security exists when all people, at all times, have physical and economic access to meet their dietary needs and
food preferences for an active and healthy life”.
Of course, I doubt any country in the world ever has, or ever will fully achieve that goal defined as ‘all people, at
all times’. But if you focus on the term ‘access to’, the World Food Summit definition makes sense. And it is
inconceivable that for many of these countries, access to food that meets all their dietary needs and food preferences
can be met by domestic food production alone.
Obviously, NZ is positioned well here. Our market is not the absolute ‘top end’ of any market. That belongs to Louis
Vuitton, Rolex and the high-end brand names that populate Fifth Avenue, la Rue St Honoré and less well known elite
streets in Shanghai, Mexico City and St Petersburg. Generally, that is not our market. Our successful production of
high-end super-yachts is the only obvious exception of some scale that comes to my mind. The NZ market is the middle and
upper-middle income bracket. Today, after stellar growth in Asia, there are some 500 million in the so-called ‘middle
class’. This is expected to be 3 billion in 2030 – only 18 years away.
The United States – still the world’s largest agriculture exporter – has exactly the same interest and opportunity. That
is, at least in part given the far wider US export interests, what is driving the Administration’s strong support for
the TPP, or Trans-Pacific Partnership, Negotiations. There will be some difficult political choices of course for the
United States to make – no negotiation is a one-way street. But the strategic prize is considerable.
Let me make our negotiating position quite clear. If TPP is to fulfil its promise of being (in the words of our Leaders’
statement, under the chairmanship of the President in Honolulu late last year) “a comprehensive, next-generation
regional agreement that liberalizes trade and investment and addresses new and traditional trade issues and 21st-century
challenges” it will have to tackle some deeply imbedded historical pockets of high agriculture protection in some of the
member economies, including in the United States.
That will not be straightforward and will take lengthy – and I mean lengthy - transition paths. But it has to be done
because there has been a flight to quality of late in Asia Pacific regional FTAs. Trying to sell today as a model for
Asia Pacific integration a traditional 20th Century FTA, chock full of permanent exceptions for agriculture would be
like trying to sell a 1997 Palm Pilot to a Californian digital native. It is not going to work, ladies and gentlemen.
The sale won’t be made.
But I am confident we can find a way through this and build a real model for putting the United States and its TPP
partners into the driving seat of trade and investment integration in the Asia Pacific. You don’t need to speak Greek to
understand that is the real growth story of the 21st Century. I think it is worth taking a few tough calls to get there.
Thank you very much.
ends