War On Assumptions
15 December 2008 Somtimes situations create popular opinions that are so obvious, so simple, that they are almost certainly misinformed – or at the very least, not considering the whole picture.
That might be the case for two of the biggest issues in international agriculture today. I’m speaking of the World Trade Organization (WTO) Doha Round on trade policy and the upsurge in biofuels. Both are widely held to be monumental changes that will work to the positive for global agriculture.
I’m not arguing here that this will not happen. Given the right set of circumstances, one or both could live up to the lofty expectations set upon them. But there is reason to doubt both Doha and biofuels, and some compelling arguments against either shaking out the way they are envisioned to.
To begin with the Doha Round, which made news in June when representatives from the US, EU, Brazil, and India met in Potsdam, Germany, there is plenty of room for skepticism. Potsdam was the scene of another breakdown in negotiations, as the Brazilian and Indian representatives walked away from the table, ending the meeting early.
It was the latest in a string of collapses that have plagued the Doha Round since it began in 2001 (which incidentally is the result of another failure; the Round was scheduled to begin in 1999 at the WTO Conference in Seattle, US, and to be known as the “Seattle Round”). However, the inability of governments to find common ground is not the only reason to question Doha.
While I consider myself a free trade advocate, I have begun to doubt the intentions of some of the nations in Doha. The spirit of Doha at its inception was one of fair trade, of improving the situations of the world’s poorest countries through a “development agenda.” However, there appears now to be different motivations – ones that see the world’s most powerful developed and developing countries wrangling for market access, leaving poor nations – and any reference to “development” – out of the discussion.
Doubt about the ultimate usefulness of Doha is supported by several sobering pieces of evidence. The World Bank, which had estimated that Doha would benefit poor countries by US $60 billion per year, has slashed that figure down to US $16 billion, with much of that going to the most advanced developing countries. Similarly, the EU’s recent “Impact Assessment” reported that many poor countries would be hurt by Doha more than helped.
For biofuels, the case is simpler. As many FCI readers know, my belief is that as long as biofuels are part of national agendas, it would be a mistake to think of them in terms of competitiveness. It is a politicized industry, and as such it will be nurtured by governments.
But that does not make it invulnerable. In a conversation with Jim Hines, CEO of RiceCo, he mentioned several points that might reverse public opinion on biofuels, which could endanger its status as a political darling. Among his concerns were a reaction from OPEC that would drive oil prices higher, as well as “the backlash to the cost of milk, meat, canned products which use corn starch … also the availability of raw materials for propanil and diuron.”
FCI reader Alan McCracken also expressed doubts, saying, “when consumers realize the true costs of ethanol from corn and the poor fuel efficiency, they will revolt and kill the project.” As a regular driver in Brazil, McCracken added that he had experienced first-hand the decreased fuel efficiency of Flex-Fuel cars.
These points are not to say that either biofuel or Doha is doomed. But like any major trend, there are sides to the stories that receive little attention. The more aware we are of all the different angles, the more prepared we will be to adapt to the changes they produce.
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