Does free import and export of food make life better for the average Indian family spending almost half its income on dal-roti? We may favour all things prefixed with the ‘f’ word ‘free’. But the answer to this one is no longer that simple.
Look at the bright side first. Free trade ensures affordable fats and proteins. A chronic shortage of oilseeds and pulses means there is no way Indian demand can be met by its own farms. We produce 7 million tonnes oil, but consume twice that. The extra comes from Indonesia, Malaysia and Argentina without barriers on either side such as customs duty and quantitative restrictions.
Traders are free to import pulses from Australia, Myanmar, Canada and Ukraine whenever they see opportunity. Competition ensures that imported supply is regular, widely distributed and fairly priced. Without imported palm oil, yellow peas, urad, and chana, we would be paying much more than Rs 100 per kilo for them. Because we are confident of assured supply from overseas, it has freed our acres to grow other crops.
Free trade smoothens price volatility from crop failure. American almonds, pistachios and apples leave us less dependent on the vagaries of weather and disease in Kashmir and Himachal Pradesh. Imported sugar from Brazil in 2009 kept a lid on prices.
Free trade has brought us new foods, new tastes, and innovative packaging from around the world. Spreads, cheese, chocolates, soft drinks, cornflakes, designer coffee, fries, cake mixes, pasta and noodles were all first a gift of free trade. We take for granted that trading companies in hubs such as Dubai or Singapore, along with Indian importers and distributors, will keep grocery store shelves stocked with foreign brands. From ingredients to exotic vegetables, free trade has evolved our diets and cooking habits gradually and pleasurably.
Yet the flip side, ban on trade, has been an equally big boon for millions of households. Sufficient supply is not enough. Food needs to be affordable too. Last year, India banned export of wheat, ordinary rice, and sugar. Local production was ring-fenced for local consumers. With no competition from foreign buyers willing to pay more, prices fell. In the last nine months, globally wheat prices have risen 60%, sugar 50% and rice 6%. In India they have been flat, or 10% less in the case of sugar.
Economists say India should export excess production and import when it runs out. That is impractical. The international market often can't provide just-in-time delivery of the food we prefer at prices we are willing to pay.
Rice is a classic case. The two largest exporters – Thailand and Vietnam don’t grow the parmal we eat. People rejected good red wheat from Ukraine sold in ration shops two years ago because they mistook it for damaged grain. There are other reasons to distrust trade. Global climate change is leading to wider fluctuations in crop yields across the world. Regular exporter Russia exited the global wheat market last August after a drought killed its crop. The resultant spike in global wheat prices was a blow for Egypt, the world's largest buyer. It could do little about it.
As nations become prosperous and outbid each other, shopping overseas is often the most expensive option. China, a regular importer of rice and oilseeds, is forecast to become world's largest wheat importer too. Imagine the impact on global grain prices. Protests in Egypt, Tunisia and Middle East show poor consumers are worst off in import dependent countries.
Only heavily food surplus nations continue to eagerly export. For the rest with a more fragile balance, such as India, it becomes hard to explain to consumers why crops grown with subsidies they have financed are being exported for private gain while they suffer inflation.
China has already stopped exporting food. Spooked by political unrest and unreliable trade, other governments are following suit. It's each man for him self. This makes the world market even more unreliable. Truth is consumers everywhere gain most from importing food. The value of trade lies in the goods received and not in the goods sold. For us, the only valid reason for exporting farm commodities is to earn the cash to import.
Problem is import and export is two sides of the same coin. There would be havoc if all nations choose to only import. With world food prices at a 20-year high in February and one billion chronically hungry people, politicians will keep swinging from one to the other. Don't expect a solution soon.
Look at the bright side first. Free trade ensures affordable fats and proteins. A chronic shortage of oilseeds and pulses means there is no way Indian demand can be met by its own farms. We produce 7 million tonnes oil, but consume twice that. The extra comes from Indonesia, Malaysia and Argentina without barriers on either side such as customs duty and quantitative restrictions.
Traders are free to import pulses from Australia, Myanmar, Canada and Ukraine whenever they see opportunity. Competition ensures that imported supply is regular, widely distributed and fairly priced. Without imported palm oil, yellow peas, urad, and chana, we would be paying much more than Rs 100 per kilo for them. Because we are confident of assured supply from overseas, it has freed our acres to grow other crops.
Free trade smoothens price volatility from crop failure. American almonds, pistachios and apples leave us less dependent on the vagaries of weather and disease in Kashmir and Himachal Pradesh. Imported sugar from Brazil in 2009 kept a lid on prices.
Free trade has brought us new foods, new tastes, and innovative packaging from around the world. Spreads, cheese, chocolates, soft drinks, cornflakes, designer coffee, fries, cake mixes, pasta and noodles were all first a gift of free trade. We take for granted that trading companies in hubs such as Dubai or Singapore, along with Indian importers and distributors, will keep grocery store shelves stocked with foreign brands. From ingredients to exotic vegetables, free trade has evolved our diets and cooking habits gradually and pleasurably.
Yet the flip side, ban on trade, has been an equally big boon for millions of households. Sufficient supply is not enough. Food needs to be affordable too. Last year, India banned export of wheat, ordinary rice, and sugar. Local production was ring-fenced for local consumers. With no competition from foreign buyers willing to pay more, prices fell. In the last nine months, globally wheat prices have risen 60%, sugar 50% and rice 6%. In India they have been flat, or 10% less in the case of sugar.
Economists say India should export excess production and import when it runs out. That is impractical. The international market often can't provide just-in-time delivery of the food we prefer at prices we are willing to pay.
Rice is a classic case. The two largest exporters – Thailand and Vietnam don’t grow the parmal we eat. People rejected good red wheat from Ukraine sold in ration shops two years ago because they mistook it for damaged grain. There are other reasons to distrust trade. Global climate change is leading to wider fluctuations in crop yields across the world. Regular exporter Russia exited the global wheat market last August after a drought killed its crop. The resultant spike in global wheat prices was a blow for Egypt, the world's largest buyer. It could do little about it.
As nations become prosperous and outbid each other, shopping overseas is often the most expensive option. China, a regular importer of rice and oilseeds, is forecast to become world's largest wheat importer too. Imagine the impact on global grain prices. Protests in Egypt, Tunisia and Middle East show poor consumers are worst off in import dependent countries.
Only heavily food surplus nations continue to eagerly export. For the rest with a more fragile balance, such as India, it becomes hard to explain to consumers why crops grown with subsidies they have financed are being exported for private gain while they suffer inflation.
China has already stopped exporting food. Spooked by political unrest and unreliable trade, other governments are following suit. It's each man for him self. This makes the world market even more unreliable. Truth is consumers everywhere gain most from importing food. The value of trade lies in the goods received and not in the goods sold. For us, the only valid reason for exporting farm commodities is to earn the cash to import.
Problem is import and export is two sides of the same coin. There would be havoc if all nations choose to only import. With world food prices at a 20-year high in February and one billion chronically hungry people, politicians will keep swinging from one to the other. Don't expect a solution soon.
