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World Bank Representative Presents Latest Report at Guelph

Monday, October 29, 2007

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Written by Jimmy Smith, Senior Livestock Specialist, World Bank

Agriculture is the key to lifting the world's poor out of poverty, according to a recent report released by the World Bank Group and presented at the University of Guelph last week.

The World Bank's annual World Development Report states that since three quarters of the world's poor live in rural areas, the best place to direct poverty alleviation efforts is in agriculture. Currently, the sector receives only 4 per cent of total official development assistance.

The World Bank has been criticized in the past for its neglect of agriculture in favour of manufacturing. During the 1980s and 1990s, the Bank made many of its loans conditional on the removal of support to the agricultural sector, a process that was particularly devastating in Africa.

Jimmy Smith, the Bank’s Senior Livestock Specialist, acknowledged that the current report represents a change in Bank policy.

“The effort this time is to put agriculture back on the map, and to certainly get Africa up to speed with the other countries,” Smith said. “But it's not only Africa where there were [problems]; there are still things that could be done in agriculture in other parts of the developing world as well.”

Smith explained that the Bank intends to pursue a “dual strategy” of both export oriented cash-cropping where it is possible and subsistence farming where it is not. Cash crops face volatile and declining global prices, and several Guelph audience members questioned the wisdom of encouraging farmers to choose export crops over those that could be consumed domestically.

“If you're going to be able to afford to buy medicines, equipment and so on, which developing countries themselves are not producing at this time, then you need to earn, and agriculture is one means of earning,” Smith explained.

Yet farmers from developing countries who produce for export face another problem: trade barriers erected within Canada, the US, EU and other developed countries to protect their own farmers from competition from the developing countries.

According to reports by Oxfam, developing countries face trade barriers that are four times higher than those faced by developing countries. These barriers cost them about $100 billion USD every year, which is twice what developing countries receive in aid. Most of this is in the form of subsidies to farmers.

Smith explained that the World Bank believes all trade barriers should be ultimately removed to allow countries to exercise their comparative advantage in production for the world market.

When loaning money to developing countries, the World Bank has often demanded those countries reduce trade barriers as a condition of the loan, but it is clear that it does not have the same power in its dealings with developed countries, who provide the funding for the work the World Bank does.

“The World Bank and others are working very hard to try to get those barriers down,” Smith said. “Our approach to this is that in order to deal with those barriers we should get them down rather than erect others [in the developing world] to counteract barriers which exist [in the developed world].”

Compounding the structural barriers faced by developing country farmers is the current food aid process. Food aid can be instrumental in assisting people during times of extreme hunger. However, current practice, particularly in the US, is to purchase food from the farmers within a rich country and ship it to the region in need.

“We believe it is better policy to buy food from developing countries themselves, within the regions, closer to where the food is needed,” explained Smith. “If you buy from Canada, the US or Europe, often it requires a lot of transport and in many cases transport is about 60% of the cost. So if I give a dollar for food aid really the amount of food is only 40 cents that arrives at the consumer.”

Food aid is often sold on developing country markets for much cheaper than local prices, undercutting local farmers. Earlier this year, CARE, one of the world’s largest international charities refused to accept millions of dollars of US food aid because they said the system was inefficient and damaging. In the past, CARE sold US food aid donations at local markets in developing and used the profits to fund its own activities.

According to the World Development Report, Canada and the EU have made some changes to their food aid policies, but the US continues to buy virtually all food aid from its own farmers.

“We believe it should be changed, but we are not in the business of pressuring our partners,” Smith said. “We believe the approach is more to present the evidence to show that this is better development policy.”

While it is true that the World Bank does not see its role as one of pressuring its financiers (the US, Canada, EU and other developed countries which contribute to its budget), the organization has long been criticized for pressuring developing countries to change their policies by attaching conditions to the loans they receive.

When asked if he believed there was an inequality of voices at the World Bank, Smith responded:

“Well, there’s a perception of an inequality of voices, and perhaps to some extent there might be some. Perception is often more powerful than fact, so they say, and if there’s a perception we need to work on that.”

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