Adam Smith in a warmer world: climate change, multilateral trade and national food security

Abstract

Market efficiency is essential in a world of scarce resources, but it is a secondary concern if human survival depends on a market that can provide reliable agricultural supply. For example, the projected increase in the frequency, magnitude and severity of extreme weather events (as increasing CO₂ emissions make the world warmer) has profound implications for the reliability of the multilateral agricultural market. Market reliability is assumed to be embedded in supply and demand price transmission, although this assumption may not hold in a changing climate. This paper examines these concerns and makes recommendations to the World Trade Organization (WTO) and to leaders of national governments about rethinking the balance between interdependence on a multilateral agricultural market and national independence (not self-sufficiency) based on development of multiple food delivery systems to protect against periodic agricultural price shocks. Once established, via the WTO Doha round, a non-distorted multilateral agriculture market will become the primary global food security system, but national governments may also wish to examine a range of secondary food security systems.

Acknowledgments

The author is grateful to two anonymous reviewers for offering helpful comments. This paper is much stronger as a result of their time and intellectual effort. Thank you. Helpful feedback was also received at a seminar presented by the author at the United Nations Food and Agricultural Organization (Rome) and at the 117th Seminar of the European Association of Agricultural Economists (Stuttgart). Comments were also received at briefings provided by the author to the governments of Japan and Singapore. Such comments contributed to the development of the present paper. An earlier draft of this paper was reviewed by David Dawe, John Finn, Thomas Friedheim, Guth Eckart and Marinus Huige. The author is solely responsible for any errors or omissions within the paper.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. An Inquiry into the Nature and Causes of the Wealth of Nations was first published in 1776, although this paper refers to the fifth and final edition, published in 1789.

2. David Ricardo’s classic study On the Principles of Political Economy and Taxation (third edition, 1821) is credited with establishing comparative advantage as an essential economic concept, although Ricardo gives credit to Smith for his inspiration.

3. These neoclassical ‘textbook’ propositions are rejected by many scholars within and outside economics, including the efficiency of markets and comparative advantage. The WTO, the FAO and other international organizations that control global trade and food security policy generally adopt these propositions.

4. Some scientists argue that climate change is an unpreventable natural phenomenon rather than a result of human activity, and thus mitigation activity is misguided. However, even these scientists recognize the importance of adaptation (see letter signed by 103 scientists and presented to the UN Secretary-General at the Bali UN Climate Conference in 2007, available from http://www.nationalpost.com/story-printer.html?id=164002). Regardless of the scientific debate, world leaders accept climate change as a reality (e.g. the G20 Leaders’ Communiqué at the Brisbane summit, 15–16 November 2014, available from http://g20watch.edu.au/sites/default/files/pictures/brisbane_g20_leaders_summit_communique.pdf; the UN Climate Change Conference 2009, available from http://en.cop15.dk/; and the G8 Leaders’ Statement 2008, available from http://www.mofa.go.jp/policy/economy/summit/2008/). Global policy will be built on an evolving belief that it is safer to assume climate change is occurring than to assume it is not, which is an application of the precautionary principle.

5. Climate change science is greatly influenced by the Intergovernmental Panel on Climate Change (IPCC), a UN body that conducts analysis of the scientific literature and makes recommendations in their assessment reports, most recently published in 2013–14 (see IPCC, 2013, 2014a, 2014b).

6. There is a substantial literature on emission trading schemes and trade. For an overview of climate change mitigation and trade see Hufbauer et al. (2009) and of climate change mitigation, agriculture and trade see Blandford and Josling (2009).

7. Argentina, Australia, Bangladesh, Brazil, Canada, Chile, China, Egypt, France, Germany, Greece, India, Indonesia, Iran, Ireland, Japan, Malaysia, Mexico, The Netherlands, New Zealand, Norway, The Russian Federation, Singapore, South Africa, South Korea, Spain, Switzerland, Thailand, Ukraine, the United Arab Emirates, the United Kingdom, the United States and Venezuela.

8. In 2007–08, dramatic commodity price increases triggered a record number of national export restrictions as governments moved to preserve supplies for domestic consumption, which led to even greater price increases (Evans, 2009). The FAO surveyed 77 countries worldwide in early 2008 to identify agricultural trading behaviour during this food panic. One-quarter of the surveyed governments imposed export restrictions, such as export bans or embargoes, export taxes and/or export quotas (FAO, 2008). Fifteen countries capped or halted wheat exports, 14 countries limited or banned rice exports, and at least 12 countries limited corn exports (Mitra and Josling, 2009). For example, Argentina, Brazil, Egypt, India and Indonesia, among other nations, prohibited exports. China, Kazakhstan, Russia and the Ukraine, among other nations, imposed export taxes or ceilings on agricultural commodities.

9. WTO Job(08)/34, Proposal on export prohibitions and restrictions, submitted to the WTO committee on agricultural special session by Japan and Switzerland (30 April 2008).

10. G8 Joint Statement on Global Food Security (2009), available from http://www.g8italia2009.it/G8/Home/G8-G8_Layout_locale-1199882116809_Atti.htm.

11. This study has examined climate change, multilateral trade and food security. Many other global challenges exist, including energy security, water scarcity, competition for land and a global population expected to rise to 9.2 billion by 2050 (see Evans, 2009).

Additional information

Funding

This work was supported by a Griffith University Research Grant [2009]. The author greatly appreciates the financial support provided by Griffith University.