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2012.07.04

Food as Strategic Goods

English translated version of "Business Prospect" on NHK Radio Channel 1 on May 15, 2012

1. Some people argue regarding the Trans-Pacific Partnership ("TPP") free-trade agreement that agricultural protection should be maintained because food is a strategic good. What is your opinion on this?

The term "strategic goods" is defined as "items or resources that are essential to a country's national security or conduct of war, the consequence of which is largely dependent on a lack or shortage of such items or resources." In this sense, there is no doubt that food falls within the category of strategic goods not only for Japan but also for other countries around the world. In recent discussions, however, the term "food as strategic goods" has been used in a slightly different context. It is in this context that an exporting country can bring an importing country to its knees by halting exports of foodstuffs. In other words, it is possible that a country can strategically use foodstuffs as a diplomatic or military means.

The ban on grain export implemented by countries such as India in 2008 is often regarded in Japan as an example of the strategic use of foodstuffs. But I do not think that foodstuffs were used as a diplomatic means in this case. In 2008 the international prices of wheat and other grains jumped. If grains had been freely traded they could have been exported from a domestic to an international market because grains were priced higher internationally. Traders could have turned a good profit if they had bought grain in a domestic market and then sold it abroad, thus reducing the domestic supply of grain. Then, while demand remained the same with less supply, grain prices naturally would have gone up in the domestic market. As a result, the poor in developing countries would be most severely affected. Assuming that they spend half of their income on food, and then food prices suddenly double or triple, they would not be able to afford to buy enough food. In order to prevent this from occurring, governments of developing countries such as India defensively restricted the export of foodstuffs. Obviously, these countries did not intend to attack other countries by strategically limiting the food supply.

 

2. What was the situation in Japan at the time of the global food crisis in 2008?

International grain prices surged three times as high as they were before the global food crisis in 2008. But in Japan the consumer food price index increased only by 2.6% from the previous year. There are several reasons for this. I would think that the biggest reason was that, while Japan's final consumption of food and drinks came to 73.6 trillion yen in 2005, only 1.2 trillion yen of which came from imported agricultural and fishery products. So even though grains - which are a part of imported agricultural and fishery products - tripled in price, the impact on final food prices was minimal. Conversely, international grain prices decreased in 2009 but Japan's consumer food price index increased by 0.2% from the previous year. As you can see from these facts, fluctuations in prices of imported agricultural and fishery products do not have a significant impact on Japan's consumer food price index. In contrast, the global food crisis in 2008 caused tremendous turmoil in developing countries such as the Philippines, which were importing a sizable volume of grains. Japan, a country with a strong economy, was so minutely affected that a rise in the price of bread led only to a slight increase in the consumption of rice, a substitute of wheat. Some people say that Haiti was severely affected by this in 2008. But it is inappropriate to compare these two countries, each of which is on such a different economic level.

In sum, a rise in the international price of foodstuffs does not cause a food crisis in an affluent society such as Japan. In other words, the most important policy for preventing a food crisis such as that in 2008 is to maintain a strong economy.

 

3. Have there been any instances in which a major grain-exporting country strategically utilizes food exports?

The United States is the world's largest exporter of agricultural products. Japan imports from the US 90% of the corn, 70% of the soy beans and 50% of the wheat that Japan consumes.

The United States banned the export of soy beans once in 1973 although it did not intend to utilize soy beans as a 'strategic' good. Nowadays, some public officials in the Japanese Ministry of Agriculture, Forestry and Fisheries argue that this export ban was caused by a poor harvest of soy beans in the United States - but this is not true. In reality, the export ban owes to a poor catch of anchovies - which are used for livestock feed - off the coast of Peru. Instead of anchovies, US livestock farmers started using soymeal, which is spun-off by pressing oils from soy beans. The US government stopped exporting soy beans to give first priority in supply to domestic livestock farmers. Although the export ban continued for only two months, it caused serious confusion in Japan, which consumes a significant amount of soybean products, including miso (bean paste), tofu (bean curd), natto (fermented beans) and soy sauce, as not feed for animals but foodstuffs for human being. Faced with a shortfall in soy beans, Japan provided Brazil, a country with a large amount of land, with financial aid for the large-scale development of agricultural land. As a result, Brazilian soy bean production has sharply increased, and now Brazil is one of the biggest exporters of soy beans, nearly surpassing the United States.

One can view the US's ban of grain exports to the Soviet Union in 1980 as an example of the strategic use of food. The United States aimed to sanction the Soviet Union for invading Afghanistan by stopping the export of grains to the Soviet Union. However, the Soviet Union then began procuring grains from other countries such as Argentina. As a result of the export ban, the US agriculture industry lost the Russian market. The United States hastily lifted the export ban the next year but saw a substantial slowdown or setback in the agriculture industry.

Other food exporting countries stand to gain if an exporter such as the US stops exporting. The United States learned a painful lesson. It has found it impossible to use food strategically as a diplomatic means. Even if it were possible, it is highly unlikely that the United States would use it to threaten its allies, including Japan.

 

4. Are you saying that we do not need to worry about a food crisis in Japan?

If Japan were to suffer a food crisis, it would be due to a disruption in food distribution channels. This is what happened in the aftermath of the Great East Japan Earthquake. The most extreme case we can conceive of is that, despite sufficient global food supply, military conflict breaks out near or around Japan, disrupting sea lanes such that food-carrying vessels cannot approach Japan's ports. In other words, Japan's food security lies in the issue that, if food imports are halted, Japan's domestic agricultural resources should be utilized to supply enough food to the Japanese people. In this sense, it is important for Japan to maintain domestic agricultural resources. We have a couple of options to ensure that this happens. One is to protect farmers with higher import tariffs, while the other is to pay government subsidies directly to farmers. We should avoid unnecessarily flaming concerns over a potential food crisis, and instead encourage coolheaded discussion about which policy is optimal for maintaining Japan's agricultural capacity: tariffs or direct payments.

 



(This article was translated from the Japanese transcript of Mr. Yamashita's speech in the "Business Prospect" session of the radio program "First in the Morning News" broadcast by NHK Radio Channel1 on May 15, 2012.)

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