WASHINGTON – With all the focus on democracy and despots, the rising price of food is being overlooked as a trigger in the uprisings in North Africa and the Middle East.

Food prices are at an all-time high, and while the impacts are hardly felt in the United States and Europe, where basic commodities are a small portion of the total cost of diets comprised largely of processed food, the spike in commodity prices is felt much more acutely in developing countries. The densely-packed cities of North Africa, heavily reliant on imported food, are particularly vulnerable to spikes in commodity prices.  Bad weather in Russia, Ukraine, and China has already pushed prices above even the highs of 2008, which led to unrest in 30 countries at the time.  Although it is impossible to know to what extent, this year’s building food crisis has fed into the revolts and revolutions in Tunisia, Egypt, Libya, and elsewhere.

Bread revolts are among the oldest varieties of social unrest, and the Arab world is no stranger to them.  Past decades saw a series of Arab uprisings in which food played a significant role, including in Egypt (1977), Morocco (1981), Tunisia (1984), Algeria (1988), and Jordan (1989).  While not the primary catalyst in all cases, access to food, or lack thereof, was a stark reminder to the oppressed of their overall condition and poor economic prospects.  Such events led to the emergence of a delicate dance between autocrats and their populations, reinforcing an unwritten pact in which the people, at the very least, would be fed.

This dance has become more and more difficult to sustain as, over time, the ability of dictators to live up to their end of the bargain has been diminished.  Africa, in particular, has become increasingly reliant on imports of even the key commodities in which it had previously enjoyed an advantage, undermining the entire continent’s ability to feed itself.  A vast hinterland of arable land has been exploited, mainly by subsistence farmers eking out a harsh living on small plots, lacking the means or the incentive to feed the hungry coastal cities. Non-functioning markets at the local, regional, and national levels have made it difficult for food to travel from areas of surplus to those in deficit. In the past, regimes would employ a variety of measures to maintain a supply of cheap food, ranging from export restrictions to subsidies and price controls.  From a market perspective, none of these fixes are optimal.  From a political economy perspective, they are unsustainable, relying on the availability of affordable commodities at a relatively stable and predictable world-market price. Price management has long been the prop of failed regimes, as was evidenced by the 1977 riots in Egypt that erupted after the IMF and World Bank imposed conditions on lifting food subsidies in exchange for loans.  Once the price support was gone, the people began to suffer and the regime began to totter.

Their increasing reliance on imports—Arab countries are projected to import 40 percent of the world’s wheat by 2021—made the autocratic regimes increasingly vulnerable to forces beyond their control.  Fires in Russia, floods in Australia, biofuels mandates in Europe and the United States, changing diets in China and India suddenly translate into higher food prices worldwide.  Taken together with the Arab world’s relatively young populations and high poverty rates—with populations spending up to 40 percent of their income on food—the age-old dance of the dictators has become ever more precarious to perform.  As rising prices fed growing popular discontent, hunger for food became a hunger for democracy.  This has been one part of the story of the “Jasmine Revolutions” of 2011.

While the toppling of aged despots is hardly a cause for lament, the spiraling hunger and poverty that has helped to drive the unrest surely is. The onset of the second food crisis in less than three years has put the world on notice that we have now definitively entered a new phase of global agricultural production.  The commodity markets of the future will be characterized by increasing volatility and recurring price shocks.  How policymakers respond will be critical.  As old systems break down, democracy and food insecurity must not be allowed to become one and the same.  Instead of the compromised government-to-government transactions of the past, efforts to promote food security should focus instead on ground-up support of agricultural markets.  Building the capacity of local farmers to produce more and helping create the conditions for commerce within countries and regions will relieve some of the pressure that comes from reliance on global markets—and on vicious autocrats.  This will not be easy; it is the hard but necessary work we face as an increasingly hungry planet.   But absent enlightened leadership and genuine action on global food security, the consequences will be grim.   Events in North Africa and the Middle East are just the beginning.  The promising Arab spring could give way to a long, hot summer.

Mark Allegrini is a Program Associate with the Economic Policy Program at the German Marshall Fund.  Joe Guinan is a GMF Fellow and Director of the TransFarm Africa Initiative at the Aspen Institute.

Photo taken by Eneas De Troya

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As leaders of the Group of Twenty  (G20) largest world economies  prepare to meet in London at the beginning of April in the midst of deepening global economic difficulties, there is real and justifiable concern that the meeting is  almost guaranteed to fail. These fears are  based on the scale of the tasks at hand, deep divisions among participating countries, and  an overarching lack of political  commitment to the process — the latter being  evidenced by the outcomes (or lack of them) of the previous G20 meeting held in Washington late last year. At that meeting, among other things, G20 leaders pledged to”refrain from raising new barriers to investment or to trade in goods and services” and to”reach agreement this year on modalities that lead to a successful conclusion to the WTO’s Doha Development agenda with an ambitious and balanced outcome.” Before the ink was even dry on these commitments, leaders of G20 countries like Russia returned home and immediately began to raise trade barriers, while the United States–the host of the summit–effectively killed an attempt to hold a ministerial meeting at the World Trade Organization in Geneva, the only way modalities in the seven-year-old trade negotiations could have been agreed upon last year, which of course  they were not.

There are certainly useful conversations to be had at the G20 level about how to begin building a new global financial architecture that addresses some of the faultlines on display in the financial meltdown during the second half of last year. But with G20 members aggressively pursuing a raft of ill-conceived economic measures at home (bailouts, domestic preference schemes built into stimulus packages,  a return  to industrial policy) in a beggar-thy-neighbor race to export the costs of the global recession to each other, international cooperation to actually get the global economy moving again in the near-term seems depressingly out of reach. Expecting leadership from the G20 on this score is like asking a  bunch of foxes to agree on how to most efficiently operate the chicken coop. A sign of the growing  difficulties can be seen in the fact that there is  faltering political will among leaders to even pay lip service any more to to the kinds of measures that are necessary to help lift the global economy out of recession (or at least prevent  recession from deepening). For example, it is unclear whether  any communique coming out of the London meeting will still include the pledge to conclude the Doha Round,  empty  as this pledge has been in the past. Meanwhile, according to reports from the WTO and elsewhere, protectionism continues its steady upward creep.

Against this backdrop, with the only real debate being whether we are facing an economic crisis of the magnitude of the 1930s or”merely” one like that of the 1970s, Professor Jean-Pierre Lehmann of the Evian Group in Lausanne is circulating a petition. The petition is  addressed  to British Prime Minister Gordon Brown. It  urges that the G20 summit issue”a resounding rejection of protectionism and an unambiguous commitment to an open global market economy along with specific measures and deadlines for implementation.”  Professor Lehmann  is asking business leaders in particular to sign it. This is a particularly  timely intervention. In an accompanying paper entitled”If Globalization is to be Saved… This Time Business Leaders Have to Show Some Guts!” he reminds us that, when the infamous Smoot-Hawley Tariff was passed by the U.S. Congress in 1930, 1,028 economists signed a petition to President Hoover calling for a veto. They were ignored. But, as Professor Lehmann points out,  ”The petition would  have had much more impact if it had been signed by 1,028 business executives.”

Professor Lehmann may have a difficult task in the United States. He will have to get  past the business associations in Washington that appear to have climbed up a tree on global trade and left themselves without a way to get down without losing face. Polls in the Economist magazine have repeatedly shown the relative inattention of corporate executives to trade policy issues, especially the importance of concluding the Doha Round at the WTO,  thus delegating the representation of their interests to the Washington-based  business  associations. These associations  have been pursuing a strategy on trade that can only be described as quixotic at best. In the most recent example, John Engler, Bob Stallman, and Bob Vastine–presidents of the National Association of Manufacturers, the American Farm Bureau Federation, and the Coalition of Services Industries respectively–sent a letter to President Obama in late February rejecting the fruit of seven years of tortuous negotiations in the Doha Round as any basis upon which to conclude a WTO agreement. Their position appears to be that Obama should hold out for a better deal. And  all the while the surrounding fires of protectionism burn  higher and fiercer.

Perhaps the most interesting thing about this letter is the fact that they felt the need to address explicitly the arguments and evidence that have recently been put forth by renowned trade economist Patrick Messerlin of the Groupe d’Economie Mondiale and by economic modelers Antoine Bouet and David Laborde at the International Food Policy Research Institute. They have  forcefully argued for the value of the Doha deal as it currently stands as”a global insurance policy against protectionism.” Instead of simply ignoring these arguments, as their organizations had done previously,  Engler, Stallman, and Vastine  write that:

Some argue that we must quickly agree to accept what is on the table in order to eliminate the”water” (the difference between bound and applied tariff rates) so as to prevent countries from raising their applied rates in these tough economic times. This argument would have some validity if countries were required to eliminate their”water” immediately. But that is not the case. The Doha text gives these countries 10 years or more to bring their bound rates down to today’s applied rates.

This is a valid point, but smacks of sophistry. If their argument is that  the”global insurance policy”  would not kick in quickly enough, why not then adopt a position that calls for the speeding-up or frontloading of a do-able  Doha agreement such that countries adopt commitments to eliminate their  tariff water as  quickly as possible given the current economic climate ? This would be a more constructive position than their  present one, which amounts to  waiting for pie-in-the-sky-when-you-die.  A good  start would be signing Professor Lehmann’s petition,  a way to begin the process of climbing down from the tree  up which they find themselves  stuck.

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The multi-billion dollar bailout package working its way toward passage in the U.S. Congress may yet come to assume a significance far beyond the precincts of the Detroit auto industry it is designed to rescue. If the same U.S. Congress maintains its hard line against efforts to reach a timely conclusion to the Doha Round of multilateral trade negotiations at the World Trade Organization, the bailout could turn out to be the torch that lights the fuse of a general resort to protectionism among America’s trading partners and the beginning of a downward spiral that undermines the world trading system and impacts across the global economy, deepening recession into depression.

A recent study by Antoine Bouet and David Laborde of the International Food Policy Research Institute quantified the risks – in manufacturing and agricultural products – of tariff water, the gap between bound and applied tariff rates, around the world. They found that more than $1 trillion in global trade is potentially living on borrowed time, the result of unilateral liberalization over the past decade that has not subsequently been locked in by any binding commitments at the WTO and is therefore reversible at any moment and without any recourse by those whose trade is impacted. Concluding the Doha Round trade talks along the lines of the package already on the table in Geneva would eliminate much of this risk, thereby providing a global insurance policy against any protectionist backlash emerging from the slump in the world economy. But political leaders and business groups in the United States are resisting such a conclusion, apparently holding out for a pie-in-the-sky scenario in which the 153 members of the WTO suddenly see the light and embrace the more ambitious Doha deal that has eluded them over seven long years of negotiations.

Director General Pascal Lamy, as part of his efforts to pick up the pieces after the collapse of the WTO Ministerial this past July (chronicled in gripping detail by Paul Blustein of the Brookings Institution), convened a meeting in the so-called “Green Room” in Geneva  several weeks ago  at which he apparently held up portraits of Representative Willis C. Hawley and Senator Reed Smoot as a stark reminder of the perils of trade protectionism in hard economic times. Smoot and Hawley were the authors of the infamous Smoot-Hawley Tariff Act of 1930, which touched off a trade war among the major economic powers of the 1930s, broadening and deepening the Great Depression and helping pitch the world into war. More sanguine observers may scoff at Lamy’s tactics as empty scaremongering, but an additional piece of new research by a team of economists under the supervision of Patrick Messerlin at the Groupe d’Economie Mondiale at Sciences Po in Paris underscores the risk and identifies a plausible path to trade protectionism in our own times.

Based on Messerlin’s earlier work, and as a complement to the IFPRI modeling analysis, the GEM researchers have made a close study of the nature of tariff water in key economies around the world. While very little exists in Messerlin’s eight €˜certain’ WTO members – Canada, China, the European Union, Hong Kong, Macao, Taiwan, and the United States – all of which largely apply their tariffs at bound levels, significant tariff water is present in a host of other large economies, not confined to emerging markets but including OECD countries like Australia. Examination of the nature of this tariff water shows that it is highly concentrated in a €˜hit parade’ of products – in particular automotive, electrical, and electronic products. As the authors note, the automobile industry is:

facing its greatest crisis of the post-World War II era, with U.S. firms asking for massive rescue packages, with European carmakers not faring much better, and with the first signs of problems spreading to Asia (for instance GM-Daewoo). The automotive sector benefits from a positive image in public opinion. It has always been good at lobbying, and has very often benefitted from high protection at the borders when facing difficulties.

One question that has scarcely received any scrutiny in the auto industry bailout debates on Capitol Hill is whether such interventions could constitute actionable subsidies under WTO rules. European Commission President Jose Manuel Barroso has already  warned the United States that, “if [the bailout] is illegal state aid, we will act at a WTO level.” The Europeans are preparing their own rescue for car companies, but other countries without recourse to large treasuries may look to border measures to protect their struggling domestic industries. The option of swingeing tariff increases is there for the taking.   And the automotive sector – as the GEM study points out – is “large and sensitive enough to trigger further protectionist reactions.”

If the ghosts of Smoot and Hawley walk again on Capitol Hill, they will not announce themselves in their full protectionist garb. They may even pay lip service to more liberal trade, looking much like Senators Baucus and Grassley, or Representatives Rangel and McCrery. But, by sanctioning domestic industry bailouts while blocking progress on a global trade deal, the Congress  may be  setting its foot on a road that leads we know not where. If it begins, it begins in Detroit.

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With the world on the cusp of a serious recession, last weekend’s G20 summit of the leaders of the richest industrial and emerging economies pledged to maintain an open global economy in the face of the economic downturn. In addition to a raft of statements responding to the financial crisis, the leaders’ 47-point action plan included a pledge to keep free trade and to liberalize it further through a renewed effort to conclude the Doha Round of multilateral negotiations at the World Trade Organization (WTO).

Together, the G20 represents 85 percent of the world economy. In the build up to the summit, newspapers were full of comparisons to the Wall Street Crash of 1929 and the Great Depression, and political leaders were reminded of the hard lessons of the 1930s, when the “beggar thy neighbor” policies adopted by the major trading powers led to a collapse of global trade. In 1930, even as the League of Nations was attempting to negotiate a tariff truce in Geneva, the U.S. Congress passed the infamous Smoot-Hawley Tariff Act, which was greeted as “a virtual declaration of economic war on the rest of the world” and responded to in kind by America’s trading partners. A downward spiral began as countries sought to export their economic difficulties to each other, stifling trade and hampering economic recovery. Financial crises come and go, but once the business networks around trade are destroyed they can take a long time to rebuild.

As the negative effects of the current financial crisis bleed into the real economy, there is a perceived danger of a resort to protectionist trade policies, as governments are tempted to shield struggling domestic producers from foreign competition or seek much-needed revenue by raising tariffs.   In the current global context, even a modest return to protectionism could have serious economic consequences. In a unique study released on the eve of the G20 summit, noted trade modelers Antoine Bouët and David Laborde of the International Food Policy Research Institute (IFPRI) have shown that more than $1 trillion worth of trade – 7.7 percent of total world trade in goods – is potentially at risk, living on borrowed time in the gap between bound and applied tariff rates. Even if we assume that countries would only impose very limited new trade restrictions, raising tariffs no further than the highest applied levels of the past decade, this still results in a contraction of world trade by 3.2 percent.

To guard against all this, the G20 leaders in their communiqué made two commitments on trade. First, they pledged that:

within the next 12 months, we will refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organization (WTO) inconsistent measures to stimulate exports.

Second, they agreed to:

strive to reach agreement this year on modalities that leads to a successful conclusion to the WTO’s Doha Development Agenda with an ambitious and balanced outcome.

Both of these statements are laudable, and have been greeted as such. The problem is that in political terms the first commitment, essentially a “standstill” agreement, may actually work against the second, a successful conclusion of the Doha Round. To understand why, it is necessary to go back to the dynamics of the WTO negotiations.

Trade ministers meeting in Geneva this past July failed once again to reach agreement on elusive modalities in agriculture and manufactured products, without which the negotiations cannot move ahead. While the proximate cause for the July collapse was a stand-off between India and the United States over the arcane details of the so-called Special Safeguard Mechanism, it is becoming ever clearer that the U.S. business community has been a significant obstacle behind the scenes. Normally a reliable source of support for trade agreements, influential business groups like the National Association of Manufacturers have adopted a high-risk strategy that no Doha deal at all is better than a Doha deal that falls short of their demands. Back in July, they besieged the United States Trade Representative with calls to walk away from the package that was on the table in Geneva.

The changed context of a full-blown financial crisis and worsening global economic outlook should have given pause to these business groups. Even small increases in tariffs can have a major impact on globalized companies with distributed supply chains making products from components that are sourced in multiple countries and have to cross multiple borders. One argument for agreeing the Doha Round package as it stands is that by making deep cuts in tariff bindings it provides a global insurance policy against protectionism – as renowned trade economist Patrick Messerlin has been arguing convincingly, and as European Trade Commissioner Catherine Ashton repeated in the run up to the summit.

The problem with the commitment not to raise trade barriers in the G20 communiqué is that, in the logic of WTO negotiations, some countries have just given away something for nothing – and at a time when the market value of that €˜something’ (certainty, predictability, a global insurance policy against protectionism) has just risen exponentially. The United States, like the European Union and a small group of other WTO members, has given up nothing by making this commitment. U.S. applied tariffs are either at or very close to their bound levels. The systemic risk to global trade stems from the large gap between bound and applied tariff rates – the so-called €˜binding overhang’ or €˜tariff water’ – that is available to a host of developing and emerging economies. Emerging economies bear all the €˜costs’ of the G20 commitment not to raise trade barriers, because they are the ones surrendering their policy space.   With recession in the United States and European Union, these countries will also be providing close to 100% of global economic growth next year. The U.S. business community just got an insurance policy against protectionism for free, without having to pay anything for it at the WTO.

To be clear, the fact that the emerging economies set their faces against protectionism is to be applauded. By taking the high road, they have recognized the truth that, by putting up trade barriers, they would in fact only be hurting their own interests – as was the case for many of the countries who rushed to impose export bans in response to the food crisis earlier this year. Trade is a positive-sum game, and the benefits it confers on countries (better prices, lower interest rates, improvements in competitiveness and productivity) come not just from enhanced export opportunities but substantially from their own domestic liberalization. In the argot of trade economists, it is the WYGIWYG principle: “What You Get Is What You Give.”

 As an institution, the WTO generally helps to advance this positive-sum view of trade. Unfortunately, however, multilateral trade talks are still conducted along the lines of a mercantilist bargaining logic in which opening up to trading partners is about making €˜concessions.’ That logic is pretty much at the end of its useful life. But for now it is the only negotiating technology we have at the WTO. The fact that leaders of emerging economies just gave up an important bargaining chip at the G20 summit in Washington could be problematic for moving forward at the WTO. It would be a sad outcome if this act of leadership were simply pocketed by the U.S. business lobby, allowing them to continue their mercantilist foot-dragging.

In fulfilling the mandate their heads of state gave to them to complete the Doha Round, trade negotiators from emerging economies would do well to point out that the G20 “standstill” guarantee is a fragile and temporary political commitment, and is in no way legally binding. If the business community in the United States wants real insurance against protectionism, then they will have to buy an insurance policy. And right now, the only place to get such a policy is at the WTO – through the successful completion of the Doha Round.

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By Joe Guinan and Nicola Lightner

The Doha Round of multilateral trade negotiations at the World Trade Organization is now dead. Like the Monty Python parrot, it has passed on, is no more, has ceased to be, expired and gone to meet its maker, kicked the bucket, shuffled off its mortal coil, run down the curtain and joined the choir invisible. It is an ex-round – all the straining to strike an optimistic note by trade ministers departing Geneva notwithstanding.

Nine intensive days of negotiations brought the trade talks within an inch of agreement, but yesterday’s collapse served only to underscore the fundamental lack of seriousness that has plagued the round for much of its seven-year life. The proximate cause of the collapse lies in the arcane details of the so-called Special Safeguard Mechanism (SSM) – a device that would allow developing countries to increase tariffs to protect their farmers from import surges and price declines. No-one had expected this to be the €˜deal-breaker’ – there were many more likely candidates – but a stand-off developed between, on the one hand, India and China, and, on the other, the United States at the head of a group of agricultural exporting countries. Failure to bridge this gap led WTO Director General Pascal Lamy to end the Ministerial with an admission of defeat.

There will talk up prospects for a resumption of negotiations in the near future. But the emotions on display among the principals yesterday tell a different story. European Trade Commissioner Peter Mandelson called the setback “heartbreaking,” and a “collective failure“; Susan Schwab, the United States Trade Representative, was visibly frustrated and distressed; while, in a measure of the last-minute desperation, Washington Trade Daily reported that Celso Amorim, the Brazilian foreign minister, pressed Schwab and India’s Kamal Nath “to have one last go €¦ Whatever agreement you two reach I will accept without questions.”

The Doha Round is dead. While India, China, and the United States were the ones left standing in the immediate blame-game of musical chairs yesterday, there are many others who share responsibility. Like Murder on the Orient Express, the answer to the question “who killed the Doha Round?” is that they all did it. The United States, India, China, Brazil, the European Union, the farm lobbies, the industrialists €¦ the list goes on and on. Europe neatly escaped blame for the final stand-off, but cost precious time at an earlier stage in the negotiations by failing to make an improved offer on agriculture. Key European leaders contributed their share of unhelpful comments from the sidelines in the closing stretch. Irish farmers staged protests against a deal. And French Agriculture Minister Michel Barnier appeared like a specter at the feast in Geneva, convening regular meetings of the European Council on the margins of the Ministerial and issuing statements, including the threat that France and eight other EU members states would reject the draft deal as it stood.

As Alan Beattie reported in the Financial Times, defensive interests – the agriculture lobbies, in particular – were out in force in Geneva this past week, while those constituencies that could normally be relied upon to push for trade deals, especially the wider business community, were notable by their absence. Not only was the number of business delegations trying to influence the outcome last week lower than at any other WTO Ministerial in years, but many private sector representatives don’t even seem to follow the negotiations, believing that there aren’t sufficient gains to be had from an agreement. This behavior is difficult to understand. Latest models on tariff reductions in industrial goods may only point to modest trade opening, but, as Patrick Messerlin has argued in a recent GMF policy brief, this should hardly come at a surprise after two decades of industrial tariff cuts by the largest world economies. But industrialists are mistakenly disregarding the value of the increased certainty stemming from large cuts to bound tariffs. A huge share of current trade is living on borrowed time in the gap between bound and applied tariffs. Now, without an agreement, average tariffs across a range of the largest economies in the WTO could surge at any time by up to three-and-a-half times.

So what’s next?

First, there will be a period of reflection, maybe a lag of as much as two years before any serious decisions are made. The political calendar – with elections in key WTO members around the world – looks like becoming more, not less, unforgiving. There will doubtless be a race to bilaterals, with all the risks they pose in terms of lack of transparency, trade diversion, and power imbalances. It may be that a frank pronouncement of the death of the Doha Round is necessary to allow for a “harvesting of the organs” – valuable elements of the deal such as trade facilitation, duty-free-quota-free access to large economies for the poorest countries, and so forth – which could serve as important confidence-building measures for getting the WTO back on track.

Ultimately, however, the failure of Doha underscores the necessity of rethinking the purpose and functioning of the World Trade Organization as an institution. Shallower and faster agreements – rather than the great omnibus trade rounds of the past – could be one way to facilitate progress so that the WTO can keep pace with rapid changes in the global economy. And perhaps the single undertaking itself – the negotiating principle that nothing is agreed until everything is agreed, and by all 153 members of the WTO – will have to be relaxed.

But for now, it is a matter of letting the dust settle. And of coming to terms with the fact that, collectively, the WTO membership as a whole just lost the option of a global insurance policy for the uncertain economic times ahead.

Joe Guinan is a senior program officer and Nicola Lightner is a program officer with GMF’s Economic Policy Program.

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