WTO Deal Critical to Ease Food Crisis, Mandelson Says

A World Trade Organization agreement removing barriers to commerce is ``absolutely essential'' to bring down soaring food prices, European Union Trade Commissioner Peter Mandelson said.

``We have to address the underlying problems of demand and supply of food,'' he said in a Bloomberg Television interview today in Sharm el-Sheikh, Egypt, where he and hundreds of business executives are attending the Middle East's World Economic Forum. ``To do that, we have to bring about a fundamental reform of trade in the world, and that can only be brought about by a WTO deal.''

WTO negotiators have been trying for more than six years to stitch together an accord that would cut agricultural subsidies, lower duties on farm and industrial goods and set rules to allow more foreign investment. The major stumbling blocks have been slashing farm aid in the U.S. and the EU and reducing industrial tariffs in large developing nations such as India and Brazil.

WTO Director-General Pascal Lamy said earlier this month that while the WTO can't produce an immediate solution to high food prices, an agreement that corrects market distortions would help in the longer term.

``Although the WTO cannot provide anything immediate to help solve the current crisis, it can provide medium- and long-term solutions,'' Lamy told WTO governments in Geneva on May 7. ``A WTO deal could help soften the impact of high prices by tackling the systemic distortions in the international market for food.''

`Political Opportunity'

A global trade accord, Mandelson said, will help farmers in poor nations.

The food ``crisis can be turned into a political opportunity,'' he said. ``If we bring about fundamental reform to liberalize and expand agricultural markets, particularly regional markets, if we eliminate the export subsidies in the developed world, sharply reduce the trade-distorting subsidies that in the developed world we give to our farmers, this will create new opportunity for agricultural producers in the developing countries to invest in their agricultural production.''

The cost of food climbed 53 percent in April compared with a year earlier, according to figures from the United Nations. Record fuel prices, weather-related crop problems, the over-exploitation of natural resources, increased demand from the burgeoning middle classes in India and China, and the push to grow corn and wheat for ethanol fuels have all contributed to the crisis.

Export Bans, Riots

In response, countries including India, Egypt, Vietnam and Indonesia have banned exports of rice -- a staple for half the world -- while skyrocketing food prices have sparked protests and riots in almost three dozen poor nations including Haiti, Somalia, Burkina Faso and Cameroon.

The benchmark price for rice exported from Thailand, the world's biggest supplier, topped $1,000 a ton for the first time on May 15. Rough rice has jumped 85 percent. Soybeans have gained 72 percent in the past year and reached a record on March 3. Corn prices have climbed 60 percent in the last year on growing demand for animal feed and biofuels made from the grain while wheat, up 56 percent from a year earlier, touched a record on Feb. 27.

``The WTO, the World Bank, the IMF and most of the rich- country governments have said the market will take care of our food needs, so we've neglected the food-security side of the whole agricultural trading system,'' said Carin Smaller, a Geneva-based trade specialist for the Institute for Agriculture and Trade Policy, which promotes sustainable farming. ``Now, you have a market that operates on who is the highest bidder.''

A global trade deal won't solve the crisis because it will make poor countries more dependent on food imports and increase the volatility of commodity prices, Smaller said.

Egyptian President Hosni Mubarak vowed to raise the issue of rising food costs during the three-day Forum, which began yesterday. ``Everyone is talking about it,'' Mandelson said. ``Everyone is engaging me on it.''

To contact the reporters on this story: Jennifer M. Freedman in Sharm el-Sheikh, Egypt, at 4520 or [email protected]; Rebecca McLaughlin-Duane in Sharm el-Sheikh, Egypt, at 1030 or [email protected]Bloomberg