Canberra - Ongoing high prices for agricultural commodities provide "a golden opportunity" to remove market distortions and liberalise global trade, according to Australia's Department of Foreign Affairs and Trade.
The recent rise in prices of global farm commodities has been substantial and could signal an upward shift in long-run average prices and an historic change from a century-long downward trend, according to an article published Thursday in the department's quarterly Trade Topics publication.
Increased global production should ease the tight supply situation and world prices are forecast to fall a little, assuming no further supply disruptions such as droughts in producer nations, it said.
However the article argued that rebuilding global stocks of these products will be slow with global demand to remain strong.
Remove distortions
"The best opportunity for the world to address long-term food security and the effects of high prices on developing countries is through removal of market distortions, not the imposition of new ones," according to the article's authors Mike Wright and Judith Laffan.
"The current Doha Round is a golden opportunity to do this," they said.
Global supply of farm products has been severely affected by a string of poor seasons in major producer nations, including Australia.
Coupled with strong global demand, in part fueled by economic growth in developing countries including China and India and demand for biofuels output, this lower global production has seen global stocks to fall to their lowest levels in many years.
Many developing nations that export farm products have sought to limit exports to increase domestic supply, the article stated, citing Kazakhstan imposing an export tariff on wheat, which forced domestic prices up 25% in one day, and Argentina imposing an export quota on beef.
Tariffs and subsidies
At the same time food importing nations have reduced tariffs or expanded import quotas, such as Morocco, Brazil, South Korea, Nigeria and Russia. Other nations, Wright and Laffan said, have introduced new subsidies, such as Indonesia's subsidy to local processors for importing soybeans.
The high food prices have raised concerns about food security and led to the imposition of a large number of "temporary" measures by governments.
Wright and Laffan argue many of these measures add an additional layer of distortion to already distorted world markets for farm products and so don't advance - and even can undermine - long-term global food security.
Concerns about global food prices offer a window of opportunity for the more than 150 members of the World Trade Organisation to help address the challenge, they said.
Barriers
Furthermore, existing trade barriers and domestic support insulate inefficient producers from market price signals and lead to a misallocation of finite resources.
Trade liberalisation will bring about a reallocation of resources to more efficient producers, resulting in increased productivity, according to Wright and Laffan.
Australia, a major global supplier of many products, has long lobbied in world trade circles to liberalize global trade in farm products, by slashing domestic support and export subsidies, and tearing down barriers to market access.
- Dow Jones