How to Feed the World: Free Trade vs. Food Self-Sufficiency

Introduction: The Global Food Challenge

The world's nations face a deepening challenge with respect to food production. The human population is increasing rapidly, but food production has not kept pace. Food production is instead bumping up against the physical limitations of the planet — access to arable land and water in particular. In some countries, these limitations have already been reached. The results in some cases have been famine; in others, dramatic austerity measures have been taken. Perhaps no greater austerity measure undertaken in the name of feeding a population was China's one-child policy, implemented in the late 1970s to stem that nation's cycle of rapid population growth and recurring famine.

There are two main components to the current debate over how to feed the world's growing population. Free marketeers cite comparative advantage to argue for increased trade in global food markets. The underlying economics has been demonstrated effective in many situations in the past. Even in China, the population has increased by hundreds of millions since the one-child policy was instituted, but that country's drastically improved economy has given it the means to purchase surplus food on world markets to meet the needs of its citizens.

The second main component of the current debate is the self-sufficiency argument. Proponents of self-sufficiency view the free market argument as deficient, failing to account for a number of critical externalities that nations today face. For example, the poorest nations are the ones with the fastest-growing populations. They have little to trade and many mouths to feed. In addition, as the world bumps up against its physical limits, food becomes so scarce that supply on world markets cannot meet demand — it is not sufficient to merely trust that there will always be enough food.

Complicating the situation for both sides are a number of externalities that impact the functioning of global food markets. Technological changes have resulted in increased agricultural yields, but at the expense of biodiversity. Health concerns have led to the banning of genetically modified foods in several regions. Almost all nations consider food security to be a matter of national security. Whether this view is anachronistic or not is subject to debate, but the resulting array of laws and subsidies creates substantial complications in the global food market.

Ricardo and Beyond: The Case for Free Trade

The laws and subsidies that currently govern the global trade in food products run counter to the arguments of free marketeers. This group, supported by the World Trade Organization and other powerful global bodies, argues that the way to ensure food security for the world's people is through the improvement of global food markets. Trade restrictions are externalities that reduce the efficiency of these markets, ultimately causing an inefficient distribution of food resources around the world. Unfettered trade, they contend, would increase the supply of food and improve its distribution.

The free market arguments rest upon the basic theory of comparative advantage. Trade, it is argued, depends on nations producing the goods in which they hold a comparative advantage and trading with other nations for goods they do not produce as efficiently. If nations are poor in agricultural land or water, they would benefit from specializing in other goods instead. China represents a classic example of the benefits of improved trade. A nation that suffered multiple famines in the twentieth century and was so desperate as to prop up the Pol Pot regime in Cambodia in order to secure access to that country's rice harvest, China reversed its cycle of food insecurity by opening up its markets. With limited water supplies and hundreds of millions of mouths to feed, China has not held a comparative advantage in food production for centuries. It did, however, hold a comparative advantage in manufacturing, on account of its enormous labor force. By opening its markets and shifting to production of goods in which it had comparative advantage, China maximized its production possibilities frontier. As a result, it successfully eliminated the widespread famines that once characterized its rural areas. China is not entirely out of the woods with regard to food security, but its focus on trade as a long-term solution has worked well thus far.

While on the surface China makes a compelling case for freer trade and comparative advantage, there are underlying assumptions in the free trade argument that call its validity into question. The first is that all nations have something of value to trade. China was blessed with enormous human resources, but many nations have very limited resources. In Africa, nations blessed with natural resources have in many cases ceded those resources to foreign interests, again leaving the nation with little to trade. While any country can conceivably find something in which it holds a comparative advantage, the reality is that for some nations the value of those goods may not be sufficient to ensure food security.

Another assumption of the free trade argument is that nations will always be willing to trade food for other goods. Under the current global economy, this is largely true. Despite rising prices, food is relatively cheap. The world currently produces enough food to feed every person alive, and we can afford to do so. Ricardo's arguments, however, do not account for physical constraints. Nations are already bumping up against those constraints, and at some point the world will too. The global population is increasing rapidly while the supply of available arable land grows very slowly and will soon begin to decrease as climate change initiates feedback loops. Fresh water supplies may run out even faster — many countries already struggle to meet demand for water as glaciers melt and underground aquifers are depleted. When physical constraints are reached, the planet will literally run out of the capacity to feed its people. Such an extreme circumstance would result in countries no longer being willing to trade food, or trading it at such a high value that many nations in need could not afford it. The extreme case may be decades or centuries away, but it is plausible within the next hundred years and is not accounted for in the basic comparative advantage model.

Strategic Resources and the Self-Sufficiency Argument

The possibility that a nation could run out of food is what drives the self-sufficiency argument. In this world, certain resources are strategic in nature. The lack of strategic resources places a nation at severe economic, political, and military disadvantage. The Soviet victory at Stalingrad cut Nazi Germany off from much-needed oil supplies in the Caspian region, bringing Germany's war machine to a halt — just as the Germans had tried to deprive Britain and Leningrad of food for the very same strategic reason. Nations today understand the strategic value of food resources. If a country depends on other countries to feed its people, that dependency places it at a severe strategic disadvantage. This reality has become manifest in both domestic and foreign policy.

Major Western nations espouse the virtues of free markets in almost all circumstances, yet they remain highly protective of their agricultural sectors. Norway refuses to join the European Union in part for fear of damaging its agricultural sector. The United States maintains a battery of subsidies to protect its sensitive food industries. In times of crisis, every nation wants assurance that it can feed its own people. The people — who in the West elect their governments — also want self-sufficiency. In a future where the world is producing food at its maximum potential, the ability of a nation to feed itself becomes a critical strategic variable. While the market for food may on paper function like any other market under the theory of comparative advantage, in practice the food market is fundamentally different from other markets. Food and water are unique commodities because they are utterly essential to life. After food and water, all other commodities in an economy are secondary.

The self-sufficiency argument recognizes this fact, but it fails to respect certain limitations. Western economics is understood largely on the basis of Western economies — large and diverse lands where the production of many different goods is possible and has historically been conducted. However, the nature of modern Western nations is fundamentally different from the nature of many other nations around the world. Many of the world's nations are vestiges of colonialism: random tracts of land carved from broader, more diverse regions. The result is that many nations lack the same level of natural endowment that classical Western economies possess. The creation of the European Union was at least in part a recognition of the fact that in certain areas of the economy, Europe stood to gain from developing economies of scale and diversity at a continental rather than a national level. That degree of cooperation, however, is unique to Europe. Many of the world's hungriest nations are precisely so because they lack natural endowments — they were carved from areas incapable of self-sufficiency by colonial powers that imported foodstuffs when needed. Native populations never lived under such artificial constraints. That many nations are artificial creations incapable of food self-sufficiency fundamentally undermines the self-sufficiency argument. Nations around the world may need, at the very least, to organize into larger and more diverse blocs — the way Europe has — in order to have any hope of attaining food self-sufficiency.

References

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Whitman, D. (2000). Genetically modified foods: Harmful or helpful? CSA Illumina. Retrieved March 20, 2010, from http://www.csa.com/discoveryguides/gmfood/review.pdf

Bello, W. (2008). How the World Bank, IMF and WTO destroyed African agriculture. WorldHunger.org. Retrieved March 20, 2010, from