G-20 leaders to address food reserves, insurance and futures markets at meetingWASHINGTON — Emergency food reserves, insurance against food price volatility and more coordinated regulation of futures markets are among the issues on which the French government will seek to achieve consensus when agriculture ministers from the G-20 countries meet in Paris in June, French Agriculture Minister Bruno Le Maire told Agweek June 3.
By: Jerry Hagstrom, Special to Agweek
WASHINGTON — Emergency food reserves, insurance against food price volatility and more coordinated regulation of futures markets are among the issues on which the French government will seek to achieve consensus when agriculture ministers from the G-20 countries meet in Paris in June, French Agriculture Minister Bruno Le Maire told Agweek June 3.
Le Maire met with Agriculture Secretary Tom Vilsack, who later confirmed that he will attend the June 22 to 23 meeting that French President Nicholas Sarkozy has organized to address the issues of worldwide agricultural production and price volatility. France holds the presidency of the G20, which consists of most of the European Union and 19 of the largest economies in the world.
Le Maire said he has refined some of the proposals France made when announcing the meeting 10 months ago, and has dropped others.
When Sarkozy proposed a meeting of agriculture ministers to try to achieve consensus, G-20 members were opposed, Le Maire said.
“Ten months later we are not far from having a consensus,” he said. “I cannot say there will be an agreement, but agreement is not out of the question.”
France has wanted the U.S. government on board with the proposals from the beginning, Le Maire said, adding that the United States has provided “constant support” for the French agenda to increase agricultural productivity and reduce food price volatility. Leaders of the G-20 countries became alarmed about price volatility in 2008 and ’09, and since have been trying to find ways to reduce the impact, particularly on poor countries that import food.
“Volatility is a problem for everybody,” Le Maire said, for both farmers, who cannot predict their incomes and for consumers, who can’t plan on how much food will cost.
The proposal for emergency food reserves, which alarmed some free-trade minded Americans, should be “a very last solution” to addressing price volatility, Le Maire said. The proposal has been put in the hands of the United Nations World Food Program, headed by Josette Sheeran, who was a Bush administration trade and State Department official before she was appointed WFP executive director.
At the Paris meeting, WFP will make a “concrete proposal,” including a definition of the stockpiles, their size and where they would be located, Le Maire said. He said he has discussed the emergency reserve idea with French farmers, who were “very cautious” because it could limit exports. He noted that officials in India and China have agreed to back only a “very limited” reserve for rice, the commodity whose price spikes caused the greatest problems in 2008 and ’09.
Le Maire said emergency reserves would need to be constructed carefully because there might be negative effects of stockpiles. He said he discussed the issue with White House adviser Michael Froman at length.
Vilsack said he told Le Maire that open markets and transparency about food supplies would constitute a “virtual reserve” that would make a physical reserve less necessary. The secretary said Le Maire replied that full transparency would be difficult because countries such as Brazil and China are reluctant to divulge information.
Vilsack said he told Le Maire that agriculture ministers should stick to their “core competencies” of increasing production and opening up markets.
World Bank President Robert Zoellick, an American, is expected to present a proposal for risk-hedging insurance for developing countries that somehow would protect those countries from price spikes.
Le Maire said the ministers also will hear proposals to improve financial regulation of futures and derivatives markets, but that the G-20 finance ministers would make final decisions on those proposals. In a signal that finance ministers had objected to agriculture ministers becoming too involved in an issue they consider on their turf, Le Maire said there had been a “slight misunderstanding” on the futures regulation proposal.
“We will open the framework on June 23, but it will be the responsibility of the finance ministers to go into the details and find the right tools,” he said.
He added that the proposal should include standardization of derivatives, tightening up on over-the-counter transactions, among other proposals. Le Maire said he proposals won’t go any further than the commodity futures provisions in the Dodd-Frank financial services bill.
Le Maire added that, as a European political leader, he has finds it interesting that Americans usually are suspicious that the Europeans will regulate business too much, but the Dodd-Frank bill in the United States “has been far more ambitious.” Le Maire said he does not think that speculation is at the core of commodity price spikes, but thinks speculation does “enhance” the spikes.
Research and investment
The G-20 agriculture ministers also will consider proposals to increase agricultural research, enhance private investment, and create an Agricultural Markets Information System like the Joint Oil Data Initiative that keeps information on oil. The ministers also will consider a proposal for G20 coordination so that there can be a “rapid response team” when one country imposes an export ban or takes some other action that may reduce the international movement of food.
Le Maire noted he has dropped a proposal to try to restrict the purchase or leasing of farmland in developing countries because leaders of those countries told him they did not want such restrictions. Ethiopian officials told him they need the freedom to enter into such arrangements because they need to get private investment to modernize their agriculture, Le Maire said.
He added that the agenda will not include any trade issues because making decisions on trade issues must involve countries that are not G-20 members.
Le Maire, who has traveled all over the world to visit agriculture ministers in preparation for the conference, said he is “trying to find balance between the agricultural powers and the developing countries.” In Brazil and Argentina, he said, officials want to reduce price volatility but they still want commodity prices to continue to rise. China, he said, has found it difficult to accept the idea of increasing transparency in the markets.
The European countries, particularly France, which increased productivity after World War II to the point that they got blamed in the 1980s for overproduction and low world prices, have “specific responsibilities” for agriculture in the future, Le Maire said. The first responsibility, he said, is to assure food security for the 500 million people who live in the European Union countries. American and European consumers are “on exactly the same line” on this, expecting domestic food security, he said.
The second responsibility, he said, is that the European Union should remain a main supplier for developing countries until they have developed their own agriculture, “which won’t be tomorrow morning.”
Third, he said, the European Union needs to use its Common Agricultural Policy to build an agricultural system that addresses issues such as climate change and sustainability.
“This is the most important goal for the CAP after 2013,” he said.