Multilateral Trading System and Global Food Security

  • Category:
    Business
  • Document type:
    Essay
  • Level:
    Masters
  • Page:
    5
  • Words:
    3044

Multilateral Trading System and Global Food Security

Multilateral Trading System and Global Food Security

Introduction

The financial and food crisis recorded in the year 2008 and 2009 has the given birth to poverty among many people across the world. Leaders from different countries have joined hands and have formed parameters that guide international trade so as to control the situation of food shortage in the country. Happening of the two crisis mentioned above has primarily interfered with World Trade Organization (WTO) rules that regulate agriculture. The agricultural sector is regarded as one of the primary sources of the exported and imported goods in any given country (Krishna, 2012). The essay examines to what extent Multilateral Trading System has contributed towards the issue of food security in the current world.

Different expertise from diverse professionals has combined their knowledge to try and economically analyze the relationship between food security and international trade. International trade regulations have set the passé for WTO in its efforts to deal with the food crisis. World trade organization under its management control has set policies that mitigate how the organization shall deal with the future food crisis. That aims at promoting global food security and eliminates hunger in the community (Markovic, 2006).

The research paper also proposes some new strategies that ought to be embraced by the International Trade as well as WTO to deal effectively with the issue of food security. That includes acting to the volatile commodity markets and ensuring proper distribution of diverse commodities in the market (Cohen and Clapp, 2009). The cross-disciplinary statutes allow scholars to get the know-how on the relationship between the environmental, political and economic aspect of International trade. While on the other hand, the policy-oriented analysis is a clear indication the implications arising as a result of the policies set by International trade regulators and the WTO. The research article appeals to the so-called policy makers and trade practitioners who are in a position to benefit from the policy recommendations made by the research.

The instability of basic commodities supply in the market has echoed a great concern on the issue of food security in the world. International trade and other word trade organizations have combined efforts to generate solutions, but there is still more to be done in the marketplace. According to research done b different scholars, proper rules have not been put into place to restrain food shortage (McDonald, 2010). There exists a different factor that contributes to the failure of rules set to promote food security. However, the research paper dwells much on the collective actions that directly or indirectly affect international trade.

Unfortunately, there exist no standard rules that have been put into place to curb the issue of collective actions in the trade community. As a result, different countries have set their trade policies to guide their internal trade activities to control the outflow and inflow of commodities as exports and imports. However, such policies tend to stabilize the internal trade rather than the international trade. To an extent, they have proved to have a negative impact on other countries trading systems. Developing a good trading system require collective actions so as to react efficiently to market shocks (Haerens, 2010). In that sense, the issue of food security turns to be a global public good. The research paper clearly argues out the ways in which different countries may take part in the collective actions.

The Nature of the Collective Action Problem

Scholars in the field of economics have been emphasizing on the difficulties encountered when coming into agreement on the public good more so when parties involved show interest of benefiting from the goods. As a result, these parties require defined mechanisms to motivate them fully participate in the agreement without “free riding.” Therefore, the best way to come to an agreement on how to provide public goods is by providing incentives that suit the interest of all. When free riders are excluded from being beneficiaries of public goods, problems arise. “Free riders” as referred to by authors, tend to come in several ways. There are those that are not in a position to participate in the provision of the public goods, hence allowed to free ride (Sampson, 2001). The most importance free riders are those that stay out of the agreement, yet they act outside of the agreement.

The global public concept is seen as an extension of public good due to the similarity they bear when it comes to the international level. National public goods, unlike public goods, tend to be underprovided due to lack of incentives that lead to the production of non-excludable as well as non-rival goods in consumption. On the other hand, the global public goods tend to be underprovided by countries even after they are fully supplied. Therefore, there is a need for own national public goods to fully supply the global public goods. The issue of GPDs has gradually expanded as a result of globalization while domestic policies have been seen to have an impact on other countries’ trading system. Under-provision of the tree aspects mentioned above leads to participation gap as well as incentive gaps (Pinstrup-Andersen, 2009). That reflects how inadequate follow-up is made when the decision has been made. The gaps are evident in the field of food security. If the three failings occur, there is the probability of collective action problem arising.

The Multilateral Trade System as a Public Good

The multilateral trade system can be regarded as a global public good. The system was created as a result of the individual actions problem within a country leading to abuse of the trade systems. Standards like GATT are set to curb such destructive practices in respect to the choice of trading policies and tariffs set by the government (KAYA, 2015). The primary cause of the multilateral institution formation is the post-war period that leads to an economic as well as political sphere. The system has been said to benefit the contracting parties.

The introduction of WTO came in to change the nature of the existing trade system across the world. The issue of food shortage had hit so many countries by the start of a 21st century hence the need for world food organizations. The emergence of WTO is associated with the expansion of GPG making it more valuable as well as increasing its depth. It can be argued that WTO created a field of interaction hence attracting international investment. The risk of exclusion from WTO membership has been made political with investments becoming more selective and effective. As researchers say, WTO can no longer be termed as a club belonging only to the developed countries; it has also been embraced by other countries. The food crisis has become a concern to so many countries in the world as the population has increased worldwide.

Despite the fact that WTO acts as a solution to the problem of collective actions, the gaps mentioned above are still in existence. As a result, countries tend to consider trade policies as a solution to food crisis while still considering WTO as an alternative option (Yadav, 2014). Different governments manage the issue of food shortage differently. Hence, diplomats are the once to decide whether to tolerate WTO or not. When the issue of trade system and food security is debated on diplomats and politicians only make suggestions but not final decisions. Legislature’s voice and skeptical opinion from the public are also put into consideration when making such decisions. To share sovereignty becomes hard more so in the multilateral arena. The participation gaps hence show up as a result of increased integration and trade. Since the implementation of WTO as a solution to collective action problems, there have been difficulties when it comes to absorbing new countries to join as members of the institution. The reason behind the situation is because new parties tend to claim to have a voice in the institution’s proceedings. The incentive gaps that cause immature implementation of decisions shall continue to get wide with an increase in the number of countries joining WTO.

Food Security as a Public Good

Although food security is considered as part of multilateral trade system, it is more of GPG. The creation of an open market trade system was created to ensure a consistency flow of basic commodities from one country to the other. As a result, consumers can receive goods efficiently from the suppliers without necessarily being hampered by government trading policies (Karacaovali, n.d.). However, the government has an obligation to ensure that there is an adequate supply of food locally. That is by providing NPG for their residents. It appears to be hard meeting local food demand when the country is using trading policies to regulate the flow of commodities. Therefore, the more countries stress on applying this policy, the less effective international trading system becomes. Arguably, countries put more emphasis on the trade policies to ensure foods security within their borders (ALSCHNER, 2013).

For an individual to effectively formulate a discussion on solutions to under-provision of food globally, there are some factors to be flagged to create a baseline of the argument on collective action problem. The first factor to consider is the closed system used in the world’s food market. That means only what the producers has managed to produce in the previous years can be consumed. Therefore, if the problem of food shortage is to be solved, the global stock must be adequate to act as food security. The second condition is that production and stock are associated with those having the willingness and ability t6 purchase commodities. Those without the ability to purchase the commodities are left to serve food insecurity in the community. When prices of production go up, the prices of commodities in the market also rises respectively. Hence, food insecurity is observed among the poor (Krishna, 2012). If the government is to solve the situation of food insecurity, there has to redistribution of food prices to make them affordable even to the low-income earners. If the problem is to be solved internally, internal trade policies have to be implemented while international transfers are to be put into place when solving the issue of food insecurity globally (Smyth, Phillips and Kerr, 2015). WTO is again not in a position to control internal transfers that aim at helping the needy. There is a need for development agencies as WTO is limited t setting rules that govern inter-country transfers.

Considering the above-explained conditions, the question posed is, what is the role of multilateral trade system in solving the collective action? After looking at the nature of individual actions problems, the aspect of WTO rules comes in (Krishna, 2012). The rules of WTO institutions try to elaborate its contribution towards food security in the world.

National Actions as a Threat to Food Security

The idea of national actions embraces the idea of imports and exports in the country. In the case of importers, the country tends to exclude itself from the international world market making its imports minimum possible. While exporters actions include but not limited to restricting exports more so when the prices of commodities are high in the domestic market. It is always beneficial to consider the aspect of national policies before going for the WTO scope that disciplines negative actions acting as a threat to other countries.

As a result of high prices of basic commodities in the local markets, some countries have opted to introduce subsidies to create an impact of cost reduction in the market. However, a significant difference exists between allowing subsidies from foreign suppliers and reducing tariffs to allow domestic consumers purchase commodities oversea (Evenett, and Hoekman, 2006).. The introduction of subsidies into the country is common in the developing country as it reduces the cost of imports. However, the developed countries tend to benefit more from these actions. Therefore, the issue of food insecurity is always evident when prices are high in the market.

WTO Rules and how they limit National Actions

Drawing back from an agreement that was negotiated in Uruguay, Agreement on Agriculture (AoA) addresses the issue on collective actions problem. Use of valuable levies, as well as quantitative restrictions, got prohibited from regulating the use of tariffs. However, WTO rules directly address the issue of exports in the international trade system. According to Article XI: 1 of the GATT, no prohibitions or restrictions that should be made on export except on duties, taxes or charges destined to a member of the WTO institution. Part two of the same article creates an exception for the quantitative restriction to prevent a shortage of food in the country. It has been hard to justify when to restrict exports and when not to making it hard to implement the WTO rule.

The commentary statutes in the article 12 of the GATT laws characterize the provisions to be named as “soft laws”. Reason being, there have been a continuous banning and taxing of exports without effective limits in respects to statutes in article 12 (Yadav, 2014). Despite the fact that WTO requires countries to place a notification while restricting exports, there are no penalties set to discourage breaking the rule. Hence, food security practice becomes hard to implement due to the failing laws made by WTO to control the international trade (Grimwade, 2000). Each government prioritizes controlling food shortage with the local market using internal policies ignoring the negative effects they have on other countries.

Recommendations towards WTO

As discussed in the research paper, WTO has tried to put into place different strategies that control food shortage in the world. In any case, it has not the expectation of people in ensuring food security. Some of the things that it should look into include, continuous search for mechanisms that can help developing countries lower the trade tariffs without fearing disruption of local production. Another way to ensure food security is by moving tariffs to a percentage of import prices hence discouraging use of specific tariffs. That shall give rise to more protection in the situation where prices are low and less protection whenever the prices are high. Improved transparency on the domestic supports as well as exports restriction may act as a way of implementing food security. That may facilitate the level at which WTO members learn each other policies.

Development of new links in the international trade agencies is a strategy that can be put into place to control food shortage at the international level. That will increase the know-how for the condition in the world market and the different stock levels in the market. To many countries, such information is treated as confidential to the firm or even to the government. To achieve a smooth working condition in the international market, the information on stock levels is material and should be considered as a global public good. That means it is relevant when making decisions pertaining food security. Following the recommended guidelines, WTO institution is in a position to achieve a higher percentage of its objectives if not all. The issue of food security needs a proper implementation of such strategies and other standards to ensure a smooth flow of basic commodities in the international market (Fisanick, 2010). Countries that are not members of the WTO organization should not be left behind in fitting the war against food shortage in the world. Instead, they ought to contribute in providing new links to the organization to create more chances of expanding the global market. Currently, a significant number of countries are currently suffering food shortage and need help in building up links to the international market and allow an efficient flow of food in the country (Sampson, 2001). Other governmental and non-governmental organizations should also embrace the idea of improving the international trade and not to dwell more on the local market. With that, the issue of food security will get a solution, and collective actions shall be minimized.

Conclusion

The research paper has clearly outlined how multilateral trade system has been used to provide solutions to the problem of food insecurity in the world. Although there WTO has not achieved its mission of implementing food security system, it has tried to regulate the rates at which tariffs are made internally. It has also set laws to regulate restriction of exports more so when the prices of commodities are high. Developing countries are said to be most affected by the issue of food shortages making them go contrary to the WTO policies. However, the research paper contains recommendations that can improve the situation for a better future. If every member of the WTO organization plays her role in implementing the food security system, it shall be easy to accomplish the long-term mission for every country to bring food shortage to an end. Taking full control over the situation may sound a dream, but collaboration among WTO members may lead to success.

List of References

Krishna, P. (2012). Preferential trade agreements and the world trade system. Cambridge, Mass.: National Bureau of Economic Research.

Cohen, M. and Clapp, J. (2009). The global food crisis. [Waterloo, Ont.]: Wilfrid Laurier University Press.

McDonald, B. (2010). Food security. Cambridge: Polity.

Haerens, M. (2010). The World Trade Organization. Detroit: Greenhaven Press/gale, Cengage Learning.

Sampson, G. (2001). The role of the World Trade Organization in global governance. Tokyo: United Nations University Press.

Fisanick, C. (2010). Food. Farmington Hills, MI: Greenhaven Press/Gale, Cengage Learning.

Grimwade, N. (2000). International trade. London: Routledge.

Evenett, S. and Hoekman, B. (2006). Economic Development and Multilateral Trade Cooperation. Washington, DC: World Bank.

Pinstrup-Andersen, P. (2009). Food security: definition and measurement. Food Sec., 1(1), pp.5-7.

KAYA, A. (2015). Designing the Multilateral Trading System: Voting Equality at the International Trade Organization. World Trade Review, 15(01), pp.25-49.

Yadav, N. (2014). Impact of Trade Facilitation on Parts and Components Trade. The International Trade Journal, 28(4), pp.287-310.

Karacaovali, B. (n.d.). Trade-Diverting Free Trade Agreements, External Tariffs, and Feasibility. SSRN Electronic Journal.

Smyth, S., Phillips, P. and Kerr, W. (2015). Food security and the evaluation of risk. Global Food Security, 4, pp.16-23.

ALSCHNER, W. (2013). Amicable Settlements of WTO Disputes: Bilateral Solutions in a Multilateral System. World Trade Review, 13(01), pp.65-102.

Markovic, I. (2006). Procedures in multilateral trade negotiations within the GATT/WTO international trade system. Medjunar probl, 58(1-2), pp.67-83.