Agricultural price regulation
I really do not imagine which benefits could be derived from such an institution. Of course, there is the famous analysis by Ricardo, which says that, by exploiting comparative advantages, trade expands the feasible production set, and creates opportunities. This is an old idea, but precisely because it is old, if it was really good, we would know!
Now, it turns out that, through centuries, hundreds of liberalisation agreements have been signed, and have been abandonned after a while... Why such a destiny would be avoided in the Inter-African case?
The real problem with this sort of agreements in market deficiencies: of course, with « perfect » markets, Ricardo would be right . But since trade must be processed through markets, if markets are not operating smoothly, it may happen - it happens frequently - that the cost of repairing market vagrancies is far higher than the benefits from trade itself... Prices are unexpectedly either too high or too low, and markets are unable to perform their true function, to adjust supply to demand.
Indeed, while such situations occur only from time to time with industrial products, the demand of which is elastic (meaning a relatively stable market equilibrium point) , it is the rule for food and other products, the demand elasticity of which is low. In addition, the free trade agrements deprive nations from the instruments which allows them to cope with emergencies and local crisis. Thus, free-trade agreements are not recomanded for countries the production of which is essentially agricultural, unless a full fledged common agricultural policy is setup, as in the case in Europe. And even in Europe, the common agricultural policy is so difficult to set up that it could run into jeopardy in the near future.....
See my book : Jean-Marc Boussard : les prix agricoles, nouveaux dialogues sur le commerce des bleds, L’Harmattan, Paris, 2017.
Je n'imagine vraiment pas quels pourraient être les avantages d'une telle institution. Bien sûr, il y a la célèbre analyse de Ricardo, qui dit qu'en exploitant les avantages comparatifs, le commerce élargit l'ensemble de production faisable et crée des opportunités. C'est une vieille idée, mais justement parce qu'elle est vieille, si c'était vraiment bien, on le saurait!
Il se trouve qu'au fil des siècles, des centaines d'accords de libéralisation ont été signés et abandonnés après un certain temps ... Pourquoi un tel destin serait-il évité dans le cas interafricain?
Le vrai problème avec ce type d'accords concernant les insuffisances du marché: bien sûr, avec des marchés «parfaits», Ricardo aurait raison. Mais comme le commerce doit être traité par les marchés, si les marchés ne fonctionnent pas correctement, il peut arriver - cela arrive fréquemment - que le coût de la réparation des caprices du marché soit beaucoup plus élevé que les avantages du commerce lui-même ... Les prix sont soit inopinément trop élevés soit trop bas, et les marchés ne sont pas en mesure de remplir leur véritable fonction, d'ajuster l'offre à la demande.
En effet, si de telles situations ne se produisent que de temps en temps avec des produits industriels dont la demande est élastique (c'est-à-dire un point d'équilibre de marché relativement stable), c'est la règle pour les produits alimentaires et autres dont l'élasticité de la demande est faible.
De plus, les accords de libre-échange privent les nations des instruments qui leur permettent de faire face aux urgences et aux crises locales. Ainsi, les accords de libre-échange ne sont pas recommandés pour les pays dont la production est essentiellement agricole, à moins qu'une politique agricole commune à part entière ne soit mise en place, comme c'est le cas en Europe. Et même en Europe, la politique agricole commune est si difficile à mettre en place que dans le future proche, elle pourrait être en péril .....
Voyez mon livre: Jean-Marc Boussard: les prix agricoles, nouveaux dialogues sur le commerce des bleds, L’Harmattan, Paris, 2017.
From your knowledge and experience how have trade agreements and rules affected the four dimensions of food security (availability, access, utilization, stability)?
If markets were functioning properly, as they are supposed to do in elementary textbooks, then, trade would be extremely beneficial for food security : By selecting the techniques corresponding to the lowest cost, markets would minimize the difficulty of ensuring access to food, even for the poor. And by pooling statistically independent risks, they would stabilize prices in a golden long run equilibrium…
Unfortunately, actual markets do not work like that. The major reason is that producers do not know much about the long run equilibrium prices. They are mistaken, sometime over optimistic, and producing more than necessary, and sometime unduly pessimistic and producing less than it would have been desirable. Then, with a relatively rigid demand, large price fluctuations follow. The latter’s are very detrimental, creating a feeling of insecurity, which results in less investments, and less production than would be necessary for securing “access” to food. I don’t speak of “stability” (obviously reduced by price fluctuations ) nor of “access” (dramatically reduced during the phases of penury, but also during gluts, whence workers are going to be fired out of bankrupt firms). Regarding utilization, I don’t know, although I suspect that large price fluctuations are not and ideal way of optimising this aspect.
Another major market shortcoming had been noticed by Thomas Robert Malthus more than 200 years ago : with a permanent oversupply of poor workers, in a perfectly free market, the productivity of labour is likely to fall below the value of the minimal food requirement, thus forcing some workers to die (and the sooner the better for alleviating suffering) until labour be scarce enough to raise its price. If one is not satisfied with such an outcome (this is my situation) , it is better to forget about extreme liberalism…
What is your knowledge and experience with creating coherence between food security measures and trade rules? Can rights-based approaches play a role?
In order to remedy the above mentioned drawbacks, it is perfectly impossible to devise a national policy without staying in contradiction with the current WTO rules, because any such intervention will be “distorting”. The only feasible policy in this respect would be international, applied everywhere to anybody. It would also contradict the liberal doxa , to some extent involving international authorities into the economy.
If an international strategy is not possible, then, national ones might be possible, under the condition that departures from the WTO rules be allowed….
How can a food security strategy, including components that explicitly support small-scale farmers in agro-biodiverse settings, be implemented in ways that might be compatible with a global market-based approach to food security?
It is simply not possible.
Mr. Jean-Marc Boussard
Price volatility is a specificity of agriculture and other sectors for which demand is rigid : even with high prices, consumers will continue to buy food while they will not increase consumption when they are low ... Only deep poverty can prevent them to buy when prices are high. In such a context, prices can increase or decrease almost without limits in response to small production variations.
At the same time, agricultural price volatility is detrimental to production levels, because farmers are responsive to price variability as well as to mean prices : At any mean price level, they will reduce supply if prices are changing too frequently, and increase it if prices are constant.
Thus, reducing food price variability is desirable. A possibility in this respect would be to increase the proportion of very poor in the population, which will increase food price elasticity.... Of course, this not serious ! More seriously, one have to cut the links between agriculture and markets, as recommanded by many serious economists such as Galiani in the 18th century, or Ezekiel, in the 1930's... See my book Les prix agricoles (l'harmattan, Paris 2017).