ACTION was very pleased to be invited to participate in a discussion on food reserves in the Assembly of the Republic of Portugal, in Lisbon.
The occasion was the meeting of the Euro-Latin American Parliamentary Assembly (EuroLat). This brings together parliamentarians from the European Union and Latin America. It provides a regular opportunity to discuss issues and challenges of mutual concern to both Europe and Latin America. Eurolat meetings are held every six months.
ACTION was kindly invited by Ms Verónica Lope Fontagné who is a member of the European Parliament and one of the two Co-Chairs of the Committee on Economic, Financial and Commercial Affairs.
The discussion took place on 18 May 2016 in the very ornate and beautiful Senate Hall. It started with an address by Dr. Hélder Muteia, the representative of the Food and Agriculture Organisation in Lisbon. He explained the role and importance of family farming. This was followed by an address by Mr. John McClintock, ACTION’s Director. He stated that food reserves are a way of moderating the natural volatility of food prices. The parliamentarians then heard from Dr. José Antonio Alvarado Correa, the President of PARLACEN (the regional parliament of Central America).
Dr. Alvarado pointed out that half the children of Guatemala are malnourished and that food reserves can play a big role in helping to reduce hunger throughout Latin America.
The members of the committee then asked a number of questions and added their own thoughts. The topic of food waste was raised. The question was posed: what does a food reserve look like in practice? John McClintock explained that ACTION is proposing a reserve of physical food (not virtual reserves of cash or futures contracts), that the reserve would consist of locally produced cereals, pulses and root crops. The storage of these foodstuffs would be undertaken by farmers. The farmers would be remunerated for this responsibility.
Here are more details of what Dr. Alvarado and Mr. McClintock said.
Mr. Co-chair, Mr Rodas, ladies and gentlemen,
It is a great honour for ACTION for Food Reserves to address your committee. On behalf of my colleagues in Brussels, I would like to thank you very warmly for your invitation. We have been cooperating over the last year with Dr. Jose Antonio Alvarado and with Dr. Ricardo Andino Lagos, whom I would also like to thank most sincerely.
I am the Director for ACTION for Food Reserves. We promote regional food reserves as a way of reducing hunger and as a way towards more and deeper regional integration. We are a think tank. I am British by nationality and European by citizenship. By training, I am an agricultural economist.
Most countries in the world are now part and parcel of a world market for food. In principle, this is a good thing because it allows international trade in food commodities to take place.
But there is a problem. The world market price for food tends to be volatile. This is mainly because the supply of food varies from one year to the next. Supply of food on to the market varies from one year to the next because in some years the global harvest is good and in other years the global harvest can be rather bad.
Food prices are therefore naturally volatile. What’s wrong with volatile food prices, one may ask? After all, it’s natural. It is the consequence of supply and demand.
The problem is that when prices are high, some families cannot afford to buy enough food to eat and there can be hunger and food riots.
A few years ago, in 2008, the price of food was very high. There were food riots in 30 countries around the world. People were killed. In 2011, food prices were again very high. There were food riots in Arab countries which triggered the Arab Spring which has unfortunately caused a great deal of turmoil.
Right now, today, El Niño is causing a lot of poor harvests: Honduras and Guatemala have both declared states of emergency regarding food supply.
Governments can avoid high food prices if they have a food reserve. Some countries, such as China and India, have food reserves. A number of European countries also have food reserves.
A food reserve is an insurance policy against bad harvests and against high world market prices. A government that has a food reserve can prevent prices becoming unaffordably high. In times of shortage and high world market prices, governments can release food from the reserve and sell it – not give it away – on the domestic market. A food reserve is thus a market-based mechanism for moderating price volatility.
In principle, every government could have its own food reserve. But it is cheaper if governments come together and share a common food reserve. By sharing a food reserve, governments can save themselves a lot of money.
That is why ACTION is promoting regional food reserves, shared by several countries.
However, if a number of governments share a food reserve, how are they to manage it? Who will make the decisions? And will the decisions be fair?
Governments which wish to work together have two options: the inter-governmental approach and the supranational approach.
In our view, it is better to use the supranational approach. This is because there have to be some rules and the rules have to be respected.
The supranational approach permits the rules to be enforced.
The alternative option is the inter-governmental approach. Here there is no mechanism for enforcing the rules.
The supranational approach – which allows the rules to be enforced – is the body and soul of the European Union and has allowed it to be relatively successful.
In our view, there is no ostensible reason why other parts of the world cannot also pursue their own supranational path – according to their own history, traditions and cultures.
To sum up, we believe that regional food reserves bring two benefits:
- they can moderate the natural volatility of food prices
- they can introduce countries to the supranational approach and deeper regional integration.
Thank you very much.