Preventing the Next Food Crisis

As drought devastates this year's grain harvest, it's vital that countries don't make a bad situation worse.

The price of food is rising once again -- and fast. According to the United Nations Food and Agricultural Organization (FAO), global food prices rose 6 percent in July alone. Scorching heat and drought have devastated corn and soy production in parts of the United States. Wheat output from other major exporters -- Russia, Ukraine, and Kazakhstan -- has also dropped due to weather-related disruptions. Although food prices remain below their February 2011 peak, and the situation has not yet reached international crisis proportions, the recent spike is cause for serious concern. That's why it's especially important now that countries not make matters worse, as some have done in recent years in the face of food shortages.

In high-income countries like the United States, and in Western Europe, sharply higher food prices create very real challenges and force families, especially low-income families, to make difficult and often painful choices about how to spend their money. In low-income countries, higher food prices impose enormous hardship, often forcing nearly unthinkable life-or-death decisions. This is particularly true for poor families in countries that import the bulk of their food, such as Angola, Egypt, and Tunisia. Rising food prices also can trigger social unrest, as has been demonstrated repeatedly in recent years, and place enormous strain on the budgets of governments that subsidize food prices.

In circumstances of rapidly rising food prices, government leaders are frequently confronted with critical decisions: How can they stabilize, or reverse, sharply rising domestic food prices? And how do they respond to the often acute needs of their people when prices do rise and shortages do occur? In response to popular demands, governments in some exporting countries have in the past imposed restrictions on the sale abroad of domestically produced agricultural output. These measures have taken many forms, such as export quotas, prohibitive export taxes, or outright bans. For example, China levied an export tax on grains and India suspended wheat exports in 2007.

But although export restrictions are generally implemented in the name of domestic food security, they rarely achieve that goal. The resulting distortions in agricultural markets usually produce a range of adverse and sometimes unintended consequences for the domestic economy. Some effects occur right away, such as lower incomes for domestic farmers, who are forced to sell their crops for lower prices to the local market. Some take longer, such as the disincentive for farmers to cultivate additional acreage and make investments in seeds, fertilizer, and irrigation. In some cases, farmers may even decide to cut back domestic food production -- despite global food shortages. All of these scenarios, over time, harm local consumers. In addition, many countries who cut agricultural exports suffer long-term loss of foreign markets, as importing countries look to what they consider more reliable suppliers. At the same time, higher prices abroad can induce farmers in other regions to plant more, cutting into the markets of those countries whose export barriers exacerbated the initial food-price spike.

Globally, agricultural export restrictions by major exporters harm food security for many other countries. They remove large volumes of basic food staples such as corn, rice, and wheat from world markets and thereby increase already rising and volatile international prices. The International Food Policy and Research Institute found that export restrictions by several countries during the 2007-8 food price crisis contributed to more than 60 percent of the rise in the global price of rice.

Food-price inflation also creates a situation where food-deficient countries may overcompensate through panic buying and hoarding of food products, further exacerbating international price spikes and adding to the pain of the most vulnerable populations. Such reflexive actions should be avoided in any case because they only worsen the problem. More broadly, the consequences of any country adopting export restrictions, hoarding, or engaging in similar types of  market distorting policies can create a vicious spiral as numerous other governments react by adopting similar, inward-looking policies.

The basic point is this: Food security cannot be viewed in zero-sum terms. The data are clear. Export restrictions on basic food staples -- even well-intentioned measures to protect domestic consumers -- lead to higher prices worldwide and ultimately reduce both domestic and international food security. Export barriers by food-exporting countries are especially harmful to hundreds of millions of people living in import-dependent developing countries, where even the slightest increase in food prices can be devastating.

The United States has actively sought agreements in multilateral fora to remove all agricultural export restrictions and ensure that nations refrain from implementing them in the future. A growing chorus of voices is joining our efforts. Last year, G-20 leaders pushed to remove food export restrictions and we will advocate for similar commitments at the upcoming Asia-Pacific Economic Cooperation Summit in Vladivostok, Russia.

It's time for world leaders to acknowledge that export restrictions undermine the goal of food security. While keeping crops at home through artificial export barriers may appear tempting for leaders in the short term, it causes great harm to the citizens of other countries, not to mention large segments of their own domestic populations. Food-export restrictions are, in short, bad and harmful policy.

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Powder Keg in the Pacific

China is rising -- fast and furious. So why can't the rest of Asia get its act together?

Over the past decade, East Asian countries have surprised observers with their eagerness to work together. After all, this is a region where ancient (and not-so-ancient) hatreds run deep. But observers shouldn't get their hopes up: Modern rivalries and historical baggage still stand in the way of transforming these arrangements into genuine regional cooperation.

On paper, progress appears to be occurring rapidly. In 2010, China, Australia, and New Zealand implemented free trade arrangements with the Association of South East Asian Nations (ASEAN), providing preferential access to each others' markets. China, Japan and South Korea are negotiating a free trade agreement. Even erstwhile enemies China and Taiwan entered into an economic agreement that reduces trade barriers such as tariffs and quotas on both sides: trade between Taiwan and China reached $128 billion in 2011, a 13 percent increase from the previous year, when the agreement went into effect.

But East Asia's patchwork of economic alliances is weighed down by history and hobbled by ineffective security arrangements. The region's three biggest flashpoints stretch back decades, if not centuries, and are like volcanoes -- mostly dormant but occasionally deadly. Besides the French, U.S., and Chinese wars with Vietnam, the last full-on slugfest was the Korean War, which ended almost six decades ago. But its repercussions linger until the present day: North Korea and the United States never signed a peace treaty and technically remain at war. Similarly, Imperial Japan's invasion of China, Korea, Taiwan, and practically all of Southeast Asia was the greatest cause of upheaval in 20th century Asia. World War II also remains far more politically explosive in Asia than it does in the United States -- as the July torpedoing of a South Korean-Japan military pact because of lingering anti-Japanese sentiment shows.

If Japan is weighed down by its historical baggage, so is China. After Chinese guerrillas kicked out the Japanese in 1945, Mao Zedong and his Communists drove Chiang Kai-shek and the Nationalists to Taiwan in 1949, an island China still claims (and at which it still points an estimated 1,000 missiles). In July, China celebrated the creation of Sansha City, a flyspeck of 3,500 people that China claims administers about 770,000 square miles of the South China Sea. That claim grates on the five other countries (plus Taiwan) that consider parts of the sea as their territory. Philippines President Benigno Aquino seemingly spoke for everyone in the region when he said in July, "If someone enters your yard and told you he owns it, will you allow that?"

China, Japan, and Taiwan also bitterly contest the uninhabited islands known as Diaouyu in China and Taiwan, and Senkaku in Japan, which lie near Taiwan, China, and the Japanese island of Okinawa. The issue strikes a nationalist chord among the rival nations: Tokyo's governor Shintaro Ishihara mischievously suggested in June that a panda cub due to be born in Tokyo zoo should be named Sen-Sen or Kaku-Kaku.

You might think that East Asian countries, which are increasingly wealthy and stable, would seek regional allies to help protect their own interests and defend their sovereignty. But this is a region of shifting diplomatic sands, and mistrust continues to stymie apparently rational arrangements. Incredibly, there is only one regional alliance that requires a military response to an attack -- it's between China and North Korea, an agreement "sealed in blood," as China's Defense Minister Liang Guanglie described it in 2009.

Of course, the United States has similar commitments to a number of countries in the region. It has formal defense arrangements with Japan, South Korea, the Philippines, Thailand, and Australia, and close security partnerships (a step down from alliances) with Taiwan, Singapore, and Indonesia. But these agreements have not been tested since the Korean War, when U.S. soldiers and marines fought back a fierce assault by Chinese troops across the Yalu River; the risk of going to war with China might make the United States think twice about honoring its security arrangements.

The only other applicable military treaty in the region is the Five-Power Defense Arrangement, a pact between Australia, Britain, New Zealand, Malaysia, and Singapore signed in 1971. The five states agreed to consult each other in the event of external aggression against peninsular Malaysia, now a mere historical footnote. That's not to say Asian countries aren't focusing on defense: Military budgets are growing rapidly. China's defense budget will nearly double in 3 years, Southeast Asian countries increased defense spending by an average of 13.5 percent in 2011, and Asia's overall military spending will likely outstrip Europe's for the first time this year. It's just that Asian countries aren't growing closer together.

Consider ASEAN, East Asia's premier regional political organization, now strained by China's rise. Established in 1967 to provide solidarity in the face of what seemed to be an inexorable communist tide, it was not explicitly a defense pact: Its members agreed only not to fight each other (they nevertheless break that promise, most recently between 2008 and 2011, when Cambodian and Thai troops skirmished over the ownership of a temple on their borders). ASEAN now embraces Vietnam and Laos, two formally communist states. During its last annual meeting in July, ASEAN for the first time in its history failed to release a basic diplomatic communiqué, likely because of China's meddling and its desire to protect its claims in the South China Sea.

China's new centrality as the biggest trading partner of most countries in the region means that while its neighbors are nervous about its growing military muscle and nationalist rhetoric, they are reluctant to place their economies at risk by confronting it directly. But China also feels vulnerable. Zhu Feng, deputy director of the Center for International and Strategic Studies at Beijing University, described China to me in 2009 as "a lonely rising power" -- an apt description for a country whose only alliance among its 14 neighbors is with North Korea, from which it appears increasingly estranged.

That doesn't mean there aren't bright spots. Indonesia, the big new democracy on the block, has been steadily shedding its antipathy to China -- for decades until 2000 it had even banned the importation of publications written in Chinese characters. Burma is liberalizing. Despite China's continuing claims on Taiwan, the two have improved relations since President Ma Ying-jeou was elected in 2008. But the lack of trust means that a regional skirmish could wipe the economic gains away.