National Assoc of Wheat Growers | Tuesday, 05 May 2009
by Alan Tracy, USW President
There have been numerous press stories about food importing countries planning to buy land abroad to secure their food supplies. While that is perhaps a natural reaction to the shockingly high prices that basic food commodities reached briefly early last year, it will not work. It sounds plausible and will make some politicians feel good about themselves, but it will not provide any genuine food security and can distract countries from other steps than really can make their peoples' stomachs more secure.
Saudi Arabia, the United Arab Emirates and Qatar have reportedly been seeking farmland in Africa and Asia. China, India, and most recently Japan have expressed interest, with China already invested in Mozambique and elsewhere in Africa. A South Korean company has bought a majority interest in a large farm in eastern Russia. Pakistan is said to be welcoming investors. In my view, there is nothing wrong with foreign investment in agriculture, as long as it makes improvements and introduces new technology to enhance production as a commercial enterprise. But don't pretend that it extends a nation's sovereignty and control into another nation's territory. That is a desert mirage, not a fertile field.
Some have already labeled these efforts as "land grabs" or "second generation colonialism." Any such investment large enough to provide a meaningful amount of production is bound to generate resentment by local farmers who do not have the capital to compete with the foreigners. That resentment will provide a ready excuse for the host country to reassert its control if it ever decides it needs that food or the land itself. Logistics also martial against real or lasting control. Let us imagine that a Saudi company buys 25,000 hectares in Kazakhstan or Ukraine, enough for one good shipload of wheat. Or ten times that much, if the local authorities will let them. Where do they store the harvest? Whose inland transport do they use? Whose roads, railroad tracks or waterways? Whose export facilities? You cannot build such facilities for one shipload, or for ten or twenty, for a seasonal product; you need vastly dispersed local storage and a steady process flow from the countryside through to export. The country of origin can still forbid the movement or export, tax it, or even take back the product or the land. The importing country will have absolutely no more control over their supply lines than they do now.
The only real food security for importing countries comes from open markets and strengthening the global institutions of free trade. Local production makes sense, too, as long as it is economically feasible. But Japan imports half of its caloric intake; China has nearly 20 percent of the worlds' population and only nine percent of the world's arable land. Egypt has some wonderful farmland but is mostly desert; India and China, with their huge populations and growing economies, will increasingly rely on imports in the future. These countries, above all others, should be clamoring for a stronger World Trade Organization with rules against export restrictions, trade distorting subsidies, export State Trading Enterprises, and other trade disruptions. Rather than the reluctant participants many of them have been, they should be working hard to make the Doha round succeed.
Food importing countries should also remember which suppliers closed their doors when food supplies grew short last year, and which countries kept their markets open, and they should reward the latter with their continuing business. The U.S. Constitution forbids export taxes, and our laws and practices give foreign buyers the same access to our food markets as domestic buyers. Having first come to Washington myself in 1980 to protest the Carter grain embargo against the Soviet Union, I am confident that we will never make that mistake again. Our farmers need and appreciate our foreign customers, and our country will never shut them out. The fact that the U.S. is one of the world's largest agricultural exporters provides genuine food security to our customers.
Buying farmland abroad seems logical, but it will not guarantee food security. Open markets will.
by Alan Tracy, USW President
There have been numerous press stories about food importing countries planning to buy land abroad to secure their food supplies. While that is perhaps a natural reaction to the shockingly high prices that basic food commodities reached briefly early last year, it will not work. It sounds plausible and will make some politicians feel good about themselves, but it will not provide any genuine food security and can distract countries from other steps than really can make their peoples' stomachs more secure.
Saudi Arabia, the United Arab Emirates and Qatar have reportedly been seeking farmland in Africa and Asia. China, India, and most recently Japan have expressed interest, with China already invested in Mozambique and elsewhere in Africa. A South Korean company has bought a majority interest in a large farm in eastern Russia. Pakistan is said to be welcoming investors. In my view, there is nothing wrong with foreign investment in agriculture, as long as it makes improvements and introduces new technology to enhance production as a commercial enterprise. But don't pretend that it extends a nation's sovereignty and control into another nation's territory. That is a desert mirage, not a fertile field.
Some have already labeled these efforts as "land grabs" or "second generation colonialism." Any such investment large enough to provide a meaningful amount of production is bound to generate resentment by local farmers who do not have the capital to compete with the foreigners. That resentment will provide a ready excuse for the host country to reassert its control if it ever decides it needs that food or the land itself. Logistics also martial against real or lasting control. Let us imagine that a Saudi company buys 25,000 hectares in Kazakhstan or Ukraine, enough for one good shipload of wheat. Or ten times that much, if the local authorities will let them. Where do they store the harvest? Whose inland transport do they use? Whose roads, railroad tracks or waterways? Whose export facilities? You cannot build such facilities for one shipload, or for ten or twenty, for a seasonal product; you need vastly dispersed local storage and a steady process flow from the countryside through to export. The country of origin can still forbid the movement or export, tax it, or even take back the product or the land. The importing country will have absolutely no more control over their supply lines than they do now.
The only real food security for importing countries comes from open markets and strengthening the global institutions of free trade. Local production makes sense, too, as long as it is economically feasible. But Japan imports half of its caloric intake; China has nearly 20 percent of the worlds' population and only nine percent of the world's arable land. Egypt has some wonderful farmland but is mostly desert; India and China, with their huge populations and growing economies, will increasingly rely on imports in the future. These countries, above all others, should be clamoring for a stronger World Trade Organization with rules against export restrictions, trade distorting subsidies, export State Trading Enterprises, and other trade disruptions. Rather than the reluctant participants many of them have been, they should be working hard to make the Doha round succeed.
Food importing countries should also remember which suppliers closed their doors when food supplies grew short last year, and which countries kept their markets open, and they should reward the latter with their continuing business. The U.S. Constitution forbids export taxes, and our laws and practices give foreign buyers the same access to our food markets as domestic buyers. Having first come to Washington myself in 1980 to protest the Carter grain embargo against the Soviet Union, I am confident that we will never make that mistake again. Our farmers need and appreciate our foreign customers, and our country will never shut them out. The fact that the U.S. is one of the world's largest agricultural exporters provides genuine food security to our customers.
Buying farmland abroad seems logical, but it will not guarantee food security. Open markets will.
