Examination of Witnesses (Questions 40-49)
MR SIMON
MAXWELL AND
DR STEVE
WIGGINS
22 APRIL 2008
Q40 Sir Robert Smith: I just wanted
that reinforced, that you think in a sense that, despite all the
headlines, there is going to be enough food?
Dr Wiggins: Yes.
Q41 Jim Sheridan: To experts like
yourselves, this may seem a rather off-the-wall or naive question
but do you see any comparison between the current food crisis
and the fuel crisis, i.e. the production of oil is limited and
restricted and therefore prices are forced up. Could that happen
in the food industry?
Mr Maxwell: There are lots of
interesting parallels to other things going on in the world at
the moment and oil is a very good place to start because, if there
is an oil crisis, most countries have reserve stocks that they
can release. What has happened in the food area is that the stocks
have run down to their lowest level for a quarter of a century.
There is very little room for manoeuvre in the system to manipulate
the market other than through the kind of distorting tariffs or
taxes that we were talking about a moment ago. Another very interesting
current comparator is the credit crunch. We see some very assertive
moves being made around transparency, a greater degree of regulation
and accountability of the institutions involved. We do not quite
see that translated across to the food area. That is one reason
why having a strong role for the Secretary-General is so important.
For example, it provides the same kind of focal point for information
and transparency in the food area as the IMF plays in the banking
area. It is a very good point you have made that we should be
looking across these different sectors to see what best practice
might be.
Q42 Richard Burden: You probably
heard me asking Josette Sheeran before about how the biofuels
debate fits into all of this. What is your take on that?
Dr Wiggins: Biofuels are clearly
part of the problem with the current spike because in the last
year, in 2007, something like 80 million tonnes out of the US
maize harvest went to ethanol distilleries and that surely has
some effect on the maize price. On the other hand, it does not
explain all of the story, because one of the most alarming events
over the last six months has been the rise in the rice prices
and, as Ms Sheeran was telling us, paying up to $1,000 a tonne
in Asia for rice is quite astonishing. The rice market is almost
completely unaffected by biofuels. Wheat is to some extent linked
into the maize market by displacement effects in North American
planting but North America is not a significant producer of rice,
so it is more than just biofuels but biofuels to some extent are
part of the issue.
Q43 Richard Burden: I suppose what
many of us are trying to come to terms with at the moment, as
Josette Sheeran said, is that there are some very complicated
issues around biofuels in the long term and the relationship between
biofuel production and food and different sorts of biofuel production.
Whilst all that is going on, are there short-term policy imperatives
for us either to adopt or ones that we have assumed are good that
now need to be rethought?
Mr Maxwell: Let me say something
about that. We need to be careful not to demonise biofuels. I
do not know whether you saw the BBC headlines this morning about
statements from the Presidents of Peru and Bolivia attacking Brazil
for its investment in biofuels. We would say from our research
that there are much more plausible targets, including EU policy,
which has provided high levels of protection for biodiesel particularly
and also bio-ethanol, and, of course, the United States. There
is no doubt that 80 million tons of maize going into biofuel in
the United States has an impact on the market. If there were to
be a one-year moratorium on using maize for biofuel, that would
make a big contribution to bringing food prices back down to normal
levels, and I know some people have recommended that.
Q44 Chairman: What about the rice
price? That is interesting. I asked before whether or not people
who have moved into meat and different diets then find the prices
moving away from them and move back. There is some evidence that
people have gone back into rice and are actually contributing,
ironically, to pushing the price up, or is it wholly unrelated
to that?
Dr Wiggins: I really am at a loss
to explain how steeply the rice price has risen over the last
couple of months. A working hypothesis would be that, with so
many major rice exporters putting in place either an outright
ban on rice exports or only allowing rice exports out at a very
high price, such as the Indian case of $1,000 a tonne, there is
now so little rice on the world market that the price is a residual
for the very small amount that is traded.
Q45 Sir Robert Smith: There could
be surpluses in these countries?
Dr Wiggins: I think farmers in
Thailand would love to be able to export more rice at $1,000 a
tonne. They must be champing at the bit.
Q46 Chairman: People are not paying
that. It is a spot price, is it?
Dr Wiggins: Yes.
Mr Maxwell: The question of what
we should do in the short run was Mr Burden's other question.
Clearly, this is about making sure that people who do not have
access to food do have access to food. The important questions
are then: is the food available and what would it cost? If you
think there might be 200 million people at the most really affected
by this—I think Robert Zoellick said 100 million might be
seriously affected and pushed back below the poverty line but
say 200 million—if you needed 100 kg per person in order
to prevent famine, that is 20 million tonnes. Global cereal production
this year is estimated by FAO at about 2 billion tonnes, so we
are talking about less than 1% of global cereal production. In
fact, it is usually the case that when we look at the cost of
alleviating or reducing poverty and undernutrition as a share
of total global income and as a share of total food supply, it
is relatively small. The key thing is to put in place measures
to enable people to access food, preferably using cash but in
some circumstances food, and making sure that countries take the
lead and are then supported by the international system. As we
support the international system—let me just make one quick
point—creating a new fund is probably not a good idea. We
already have a large number of funds and programmes working on
this. UN agencies, apart from their incoherence, as Hugh Bayley
rightly observed, are very much handicapped by the very high share
of funding, up to three-quarters in some cases, that comes in
the form of special-purpose trust funds and special-purpose vehicles,
which make it impossible to manage these agencies. How do you
manage an agency where three-quarters of your money is coming
in dribs and drabs for special things and there is no coherent
priority setting? What we need to do here is to find a way to
put extra money into the agencies in order to support the short
and then medium-term food programmes, and to do it by supporting
their core budgets and not by setting up special-purpose vehicles.
Q47 John Battle: I am still working
over the comments that our colleague Hugh Bayley made in the previous
session because I think a major issue is this business of the
UN and whether it is possible to have the UN streamlined to deliver
one food security agency. Do you see good prospects for having
one UN initiative on food security? We have heard from our previous
witness, and she might be championing it, but what are the chances
and what are the major obstacles to it? Otherwise I am with you
on this one. I can see why we all say the UN is the way forward,
that we have a crisis of confidence in the UN and they end up
getting even less money and the appeals all fall foul.
Mr Maxwell: I would say that the
key issue about reform of these agencies is never `why' and never
`what', but `how'. It is how do you create an incentive structure
which makes it plausible and possible to deliver change? It does
seem to me that we have two absolutely key factors working in
our favour at this moment. The first is the sense of crisis, the
need for urgent and co-ordinated action; and the second is that
we are living at a time in which, with some qualifications, aid
budgets are rising. In thinking about how to lead the change,
a very important lever is money. We can put an offer on the table
to the developing countries and to the UN agencies which says
"There will be very significant rewards for you." The
UN currently accounts for somewhere between 10 and 15% of total
aid. If aid is in the process of doubling over the next five years,
as has been promised following the Gleneagles summit, we have
the prospect of doubled budgets for the UN. We could go from say
$15 billion to $30 billion. If we take a three-year or even a
five-year planning framework, as we do in the UK, we could be
talking about somewhere between $90 billion and $150 billion on
the table for the UN. That is a conversation that donors should
be having with the UN and saying "What can we have in return?"
That would be attractive to the UN agencies, of course, but it
also ought to be very attractive to the main stumbling block,
which has historically been the G77. What we need to then do is
build a political conversation with the G77. The Select Committee
and others like it around the developed world have an enormously
important responsibility and opportunity to open this conversation
with your counterparts in developing countries and see whether
we cannot build a consensus for radical change in the UN over
the coming years.
Q48 Chairman: I am conscious of the
fact that we have overrun and you have other engagements, so can
I say thank you very much, both for coming in but also for the
evidence you have given us, and for all the work we do together
in any case. We are really doing a short inquiry into the World
Food Programme and these other issues we are raising. We may come
back to it in more detail at a later date if we feel it has raised
questions that need more detailed analysis. I am slightly encouraged
by your comments on how prices will be determined and the ability
perhaps if we can get organised to respond to it, but I am also
confused because the comments we get are pointing in different
directions. I will happily take your analysis as more optimistic
than some of the others.
Mr Maxwell: It would be dangerous
to assume that we are not facing a very serious issue with food
prices over the next few years and that an increase of 40% will
not cause a great deal of hardship to a large number of people.
It is a problem but it is also an opportunity.
Q49 Chairman: I take your point;
what you are saying is that we should try to grasp that opportunity.
Mr Maxwell: We wish you luck with
your inquiry and thank you for listening to us.
Chairman: Thank you very much.
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