Sokoine University of Agriculture (Tanzania):
Protectionist policies are exacerbating inflation, according to Sunny Verghese, CEO of Olam Agri, one of the world’s largest agricultural commodity traders. Verghese argues that government-imposed trade barriers, aimed at securing domestic food supplies, have significantly contributed to the rising food prices globally.
In his speech at the Redburn Atlantic and Rothschild consumer conference, Verghese explained that such protectionist measures create an artificial imbalance between supply and demand. For instance, in 2022 alone, 154 countries imposed 1,266 non-tariff trade barriers as a reaction to the geopolitical instability caused by Russia’s invasion of Ukraine. These measures disrupted global trade flows and inflated food prices.
Wealthier nations, in their bid to safeguard food security, have built up large buffer stocks of strategic commodities. This stockpiling has driven up global demand and prices, worsening the situation for poorer countries struggling with food insecurity. Verghese cited examples of countries like India and China, which have accumulated substantial reserves, thereby distorting the market dynamics.
Additionally, protectionist policies have been triggered by climate change-related disruptions in agricultural production. For example, Indonesia’s ban on palm oil exports and India’s restrictions on rice exports were attempts to control domestic prices and ensure local availability amid production volatility caused by climate events. However, these actions have had a counterproductive effect on global food prices and availability.
The aftermath of the Covid-19 pandemic and the ongoing conflict in Ukraine have already strained global food supplies. Protectionist policies further intensify these strains by limiting the free flow of agricultural commodities. This creates a ripple effect, leading to higher food prices worldwide, contributing to the cost of living crises in many regions.
Verghese emphasized that such protectionist approaches are counterproductive. Instead of stabilizing food prices, they lead to greater volatility and higher inflation. He warned that as geopolitical tensions and climate change continue to affect agricultural production, more countries might resort to protectionism, which could exacerbate the global food crisis.
The world is headed for “food wars” as geopolitical tensions and climate change push countries into conflict over waning supplies, said one of the world’s largest agricultural commodity traders.
“We have fought many wars over oil. We will fight bigger wars over food and water,” said Sunny Verghese, chief executive of Olam Agri, a Singapore-based agricultural trading house.
Addressing the impact of climate change on global yields, Verghese urged the gathering of consumer industry executives, including the bosses of Coca-Cola and Associated British Foods, to “wake up” and take more action on climate change.
Governments should charge a tax for carbon, he argued. “Carbon is free today, so we are polluting indiscriminately,” he said.
There are ways to support local productionism without protectionism. Inequality & racist colonialism drive a lot of trade, & manipulatedly cheap fossil fuels allow it, through policy-created subsidies & externalities.
For example, Iceland had the money to develop its renewable resources & thus become, like the US Pacific Northwest, a major producer of aluminum, an electricity-intensive product. But there’s not a bauxite mine for a thousand miles of either place; the ore has to be shipped, at huge energy, carbon & pollution cost compared to building renewable energy at or near the mine site, smelting the aluminum there, making products there, & shipping the lighter & less bulky finished product instead.
A lot of shipping happens because labor is cheaper where people are in desperate poverty & because corporations are predators designed to exploit such “weakness”. Changing the nature, purpose, function, of, & governance over corporations, & radically equalizing not just within countries but between them, could eliminate exploitation & suffering of workers on both sides of the offshoring problem, a well as destructive exploitation of nature. It will require an aroused global public, & democratic government stronger than the corporations, industries, & mbillionaires it needs to control. That will take a revolution.
Shipping bauxite to Iceland uses very little energy compared to the cost of refining* it. Iceland is a great example of turning abundance of energy into a market export (in the form of a refined metal).
Countries can counteract the resource curse of having multinationals come in and grab local raw materials by controlling exports and building local refining industry (as with Brazil using its coltan reserves as a starting point for a local industry exporting refined niobium products). I see the issue less about colonialism and more about local officials (whether Brazil or Louisiana or Pakistan) taking bribes from the big companies for exclusive contracts.
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*Upwards of 75% of aluminum production comes from recycling anyway.
The 2007 documentary King Corn looks into the subsidizing of corn in the US, including large corporation farming, corn’s use as animal feed (about a third) and leveraged products like high fructose corn syrup. It had the expected emphasis on the downsides of our current agricultural, but I was pleasantly surprised at the inclusion at the end of an interview with the elderly Earl Butz, former Secretary of Agriculture.
Butz pointed out that the US policy for agriculture was biased toward overproduction, as a necessary component of national security. I had never thought of it in those terms, but overproducing food should be a priority of any stable country. Better that extra food should languish in government storage caves or be shunted to pet food than risking a shortage.