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Viewing cable 08LONDON1176, UK FOOD SUMMIT HIGHLIGHTS PM BROWN'S CONCERN
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| Reference ID | Created | Released | Classification | Origin |
|---|---|---|---|---|
| 08LONDON1176 | 2008-04-25 16:40 | 2011-08-25 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy London |
VZCZCXRO8337
RR RUEHAG RUEHBZ RUEHDF RUEHDU RUEHGI RUEHIK RUEHJO RUEHLZ RUEHMA
RUEHMR RUEHPA RUEHRN RUEHROV RUEHTRO
DE RUEHLO #1176/01 1161640
ZNR UUUUU ZZH
R 251640Z APR 08
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC 8393
INFO RUEHZO/AFRICAN UNION COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHSS/OECD POSTS COLLECTIVE
RUEHMO/AMEMBASSY MOSCOW 2614
UNCLAS SECTION 01 OF 04 LONDON 001176
SIPDIS
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: EAID EAGR PGOV UK
SUBJECT: UK FOOD SUMMIT HIGHLIGHTS PM BROWN'S CONCERN
¶1. (SBU) Summary: At an April 22, PM Brown-hosted meeting to
address increases in food prices, participants disagreed
about future trends and the impact of biofuels, agreed that
action needed to be taken both for immediate social
protection and longer-term agricultural investment, and that
care should be taken not to talk up a "crisis." The UK press
release following the meeting included a broad range of
proposed actions that the UK plans to pursue both
domestically and internationally, ranging from increased
assistance to a WTO trade deal and improved World Bank and
IMF effectiveness. DFID also announced a new GBP 455 million
($910 million) five-year assistance package. In DFID's view,
the current crisis is being caused by high and rising food
prices, not a shortage of food. End Summary.
¶2. (SBU) On April 22, PM Brown hosted a one and a half hour
meeting to discuss ways the international community could
respond to the growing global food price crisis. Overseas
Development Institute (ODI) Director Simon Maxwell, who was
called on to set the stage at the meeting, told us he was
surprised that the meeting, which was originally intended to
be a small private event, was publicized and expanded to
include more international players. Participants included UK
government ministers, international organizations such
Josette Sheeran from the World Food Program, business,
academics and others. For the full list, see paragraph 16.
¶3. (SBU) PM Brown opened the meeting, introducing the list of
action areas he had asked the Japanese Prime Minister to put
on the G8 agenda, including short tern measures to deal with
immediate hardship and long term structural measures as
outlined in paragraph 13. (see also
www.number10.gov.uk/output/Page15321.asp). UK Development
Secretary Douglas Alexander concluded the meeting by
SIPDIS
emphasizing the need for the international architecture to
keep up. He noted that this had been a key theme at the World
Bank Development Committee in Washington earlier in April. He
also expressed surprise there had not been more discussion
about concluding a WTO trade deal as a means to address food
price concerns.
Food Prices and Biofuels
------------------------
¶4. (SBU) Participants disagreed about likely food price
trends and the impact of biofuels. UK Environment Secretary
Hilary Benn noted that the futures market for wheat showed
the price falling more than 25 percent from current levels by
next year. Cargill's Ruth Rawling predicted that wheat
prices would come down quite quickly, noting that there is a
harvest somewhere on the planet every sixty days, except for
rice. ODI estimated that prices would fall back from their
current peak to roughly what they had been in the early
1990s. (See ODI's discussion paper on the topic at
http://www.odi.org.uk/publications/briefing/
bp37-april08-rising-food-prices.pdf)
¶5. (SBU) On the other hand, Stefan Tangermann from the OECD
Trade & Agriculture Directorate said their modeling showed
maize prices for the next ten years would be 60 percent
higher than during the past decade and that half of this
increase was due to biofuels. Joachim Von Braun, Director
General, Inter Food Policy Institute Research (IFPRI)
suggested a moratorium on maize for biofuels. Their modeling
showed it would reduce maize prices by 20 percent immediately
and wheat prices by 10 percent, with further reductions
because it would discourage speculation.
¶6. (SBU) Others defended biofuels. Benn wanted to see hard
facts and analysis on biofuels. Mike Bushell, from
agri-business company Syngenta, argued against demonizing
biofuels. Rawling argued against rigid mandates and in favor
of buy-out clauses for biofuels. She also noted that
flexibility is essential since biofuel targets are fixed in
terms of fuel markets not food markets, and 2.5 percent of
the fuel market can represent as much as 20 percent of a food
market.
Causes and Remedies
-------------------
¶7. (SBU) Maxwell told us the headline messages about social
protection in the short run and agricultural investment in
the long run were clear to the participants, but everything
else about causes and remedies was contested. Paul Collier,
Oxford University, argued that the main cause was growth in
China, which no one wants to reduce. He also pointed to
"follies" that he wanted to undo, specifically U.S. biofuels
subsidies, and the EU refusal to accept genetically modified
LONDON 00001176 002 OF 004
crops. Collier wanted to see large-scale farming in Africa
along the lines of the Brazilian model. (For details, see
Collier's April 15 article in the Times: Food Shortages:
Think Big. www.timesonline.co.uk) On April 24, Malcolm Bruce,
MP and chairman of Parliament's International Development
Committee (IDC), speaking at an IDC evidence session
dismissed Collier's suggestion that African countries adopt
the Brazilian model as a "professorial point of view, not a
politician's."
¶8. (SBU) At the meeting, Maxwell stressed that the crisis had
macro-economic as well as humanitarian dimensions. Low Income
Food Deficit countries face import bills some $20bn higher
this year, and food price increases are resulting in
double-digit inflation in many countries. Donald Kaberuka,
President, African Development Bank, also focused on
macroeconomic impacts, as governments could respond to higher
prices by increasing subsidies and wages, which would lead to
higher budget deficits.
¶9. (SBU) Josette Sheeran, World Food Program (WFP) director,
made a case for the importance of the humanitarian case load.
She said the additional cost of maintaining WFP,s
operations this year has now risen to $700 million, compared
to $500 million in February. (WFP has had to pay up to $1000
per ton for rice). She raised concerns about low planting in
poor countries, constrained in part by high input costs (e.g.
planting in Kenya is one third down). She also said WFP is
transitioning from being an agency that deals only with food
aid logistics to one that addresses the broader causes and
remedies to address hunger itself, a project which is slowly
gathering donor support. Jacques Diouf, UN Food and
Agriculture Organization, talked about the Food Summit he is
convening from 3-5 June in Rome. He said the priority was the
current growing season, and endorsed Sheeran,s points about
the negative impact of high fertilizer and seed prices.
¶10. (SBU) Several participants focused on the need for
immediate social protection for those in need. Phil Bloomer
from Oxfam argued against food subsidies for and in favor of
targeted social protection for those in need. David Mepham
from Save the Children talked about the need to scale up
existing social protection programs (e.g Ethiopia), but noted
that there are countries where the issue is building programs
rather than scaling them up. Bruce was also concerned that
small farmers would buy more inputs because food prices were
high, and then be unable to cover these costs if prices fell.
He wanted to see some kind of insurance to prevent this
outcome.
¶11. (SBU) Kaberuka said the regional development banks were
working on a harmonized approach to support agriculture.
Speaking in a Parliamentary committee meeting on April 24,
DFID Parliamentary Secretary of State Gillian Merron outlined
DFID views on the African Development Bank's role to address
the food crisis. She praised Kaberuka's participation in the
summit, noting that it showed a willingness to adapt the
AfDB's role to fit the situation. She stressed that the AfDB
is not set up to lend directly to farmers, nor should it be,
but there is the potential for AfDB to play a role in
agricultural infrastructure projects. She said DFID would
work with AfDB toward this goal.
Messaging
---------
¶12. (SBU) Maxwell urged participants to get the messaging
right, so as not to talk up a crisis, and instead present
this as a manageable problem with short and long term
solutions, with implications for the international system.
Tangerman endorsed the point about messaging and said there
was a danger of talking up the bubble. He pointed to recent
unhelpful remarks from IMF Managing Director, Dominique
Strauss-Kahn, about prices going even higher.
UK Food Crisis Announcement
---------------------------
¶13. (U) A UK statement -- apparently not coordinated with the
other participants -- following the meeting said it had
addressed the short and longer-term factors causing increased
food prices at home and abroad and possible policy solutions.
It noted the following issues were discussed at the meeting:
-- We will work in the G8 for an international strategy. An
international strategy will need to include: more and better
support for agricultural and rural development in the poorest
countries; more and better research into methods for
increasing yields and productivity; a review of the wider
economic and environmental impacts of biofuel production;
LONDON 00001176 003 OF 004
commitment to increase social protection programs which take
people out of long-term dependency on food aid; consideration
on how to maximize the effectiveness of IMF and World Bank
support; and reform of relevant international institutions.
-- We will increase support to the poorest. In addition to
the GBP 50 million per year we already spend on social
protection and safety net programs in Africa, the UK has
today pledged an extra GBP 30 million to support the World
Food Program, and extra GBP 25 million to Ethiopia for their
national safety net program. We will work to encourage other
donors to make additional humanitarian assistance available
and monitor the need to step up support.
-- We will work together to address domestic price rises. The
Government has called on consumer groups, food producers,
manufacturers and retailers to consider how we can
collectively meet the challenges posed by the global food
crisis.
-- We will increase research into improving yields. The UK
has today announced new funds for agricultural research over
the next five years. This will be critical if agricultural
production is to keep pace with increased demands for food.
-- We will work to achieve a successful WTO deal, including a
substantial 'aid for trade' package to help build the trading
capacity of the poorest countries. The WTO round offers a
major opportunity to increase trade flows in agricultural
(and other) goods, particularly for developing countries. We
want a WTO deal which reduces significantly reduces
agricultural tariffs and trade distorting subsidies. High
transport costs also push up local food prices and restrict
trade in Africa.
-- We will work within the EU to further reform the EU's
Common Agricultural Policy (CAP), through the CAP Health
check and the EU budget review. It is estimated that the CAP
costs UK consumers GBP 3.5 billion (2005) through higher
prices. Reductions in EU agricultural tariffs and CAP reform
would reduce the cost of food to EU consumers and increase
the capacity of developing countries to produce and export
agricultural commodities.
-- We will review our approach to biofuels. We need to look
closely at the impact on food prices and the environment of
different production methods and to ensure we are more
selective in our support. If our UK review shows that we need
to change our approach, we will also push for change in EU
biofuels targets.
DFID Assistance
---------------
¶14. (U) Also on April 22, DFID announced a GBP 455 million
($910 million) five-year aid package to address rising global
food prices. The package is designed to address both short
term needs and long term solutions. The UK aid package
includes: $60 million in support of recent appeals by the
World Food Programme for countries most at risk; $800 million
(GBP 400 million) over five years devoted to agricultural
research, that will double DFID's current spend and help poor
countries grow more food for themselves; and $50 million (GBP
25 million) this year to boost the incomes of the poorest
people in Ethiopia.
¶15. (U) In DFID's view, the current crisis is being caused by
high and rising food prices, not a shortage of food. The
solution is to improve access to food for poor people. Prices
are rising because of increasing demand for food due to
population growth, and increasing oil prices and their impact
on the cost of food production, processing and distribution.
¶16. (U) Participants at the April 22 event were: Prime
Minister Gordon Brown; Rt Hon Douglas Alexander MP, Secretary
of State for International Development; Rt Hon Alistair
Darling, Chancellor of the Exchequer, Rt Hon Hilary Benn MP,
Secretary of State for Environment, Food and Rural Affairs;
SIPDIS
Rt Hon Malcolm Bruce MP, Chairman, International Development
Committee; Prof John Beddington Chief Scientist; Phil
Bloomer, Oxfam; Dr Mike Bushell, Syngenta; Paul Collier,
Oxford University; Professor Ian Crute, Rothamsted Research
Institute; Jaqcues Diouf, Food and Agricultural Organisation,
UN; Andrew Dorward, School of Oriental and African Studies;
Lawrence Haddad, Institute of Development Studies; Paul
Hodson, European Commission Transport & Energy; Donald
Kaberuka, African Development Bank; Reijo Kemppinen, Head of
Mission, EC Rep of the UK; Peter Kendall, National Farmers
Union; Justin King, Sainsbury's; Simon Maxwell, Overseas
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Development Institute; Jill Johnstone, National Consumer
Council; David Mepham, Save the Children; Kanayo Felix
Nwanze, Vice President ) IFAD; Ruth Rawling, Cargill plc;
Josette Sheeran, World Food Program; Stefan Tangermann, OECD
Trade & Agriculture Directorate; Goran Trapp, Morgan Stanley;
and Joachim von Braun, Director General IFPRI Inter Food
Policy Institute Research.
¶17. (SBU) Comment: Brown's hastily arranged "summit" had no
other government leaders represented. It came at a time of
unremittingly bad political news for the PM and offered him a
chance to assert leadership on a widely supported
international issue.
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