Side event at the 77th session of the UN Economic and Financial Committee (Second Committee)
13 October 2022
The role of trade and logistics in getting food and energy to all
Ms. Francesca Cassar, First Secretary, Permanent Mission of Malta to the United Nations and Rapporteur of the Second Committee
Your excellencies, distinguished panelist speakers, delegates to the Second Committee, thank you very much for coming
Dear colleagues, Dear friends:
I am delighted to welcome you to this first UNCTAD side event to the Second Committee. I’ll keep my remarks short as you should have the center stage.
The theme of today’s session could not be clearer: “The role of trade and logistics in getting food and energy for all.”
Allow me to say three things about this important subject.
First, the world is in the middle of what S-G Guterres calls the perfect storm – a world of cascading crises. We have climate change, which is hitting harder every year. We have the pandemic, which has left huge scars in all countries. And now we have the war in Ukraine, which has accelerated a cost-of-living crisis of global proportions, marked by rising food and energy prices, and rapidly deteriorating financial conditions especially in developing countries.
Now, this perfect storm has an important trade dimension.
Rising trade costs, for example, especially for maritime trade, explain a big chunk of rising food and energy costs. Research by UNCTAD shows that at least half of the rise in food prices, how the food prices, we saw at the beginning of the year was due to growing logistic costs alone.
Trade restrictions, which now cover about 10% of all traded calories worldwide, also have an important effect on prices, and especially on the availability of certain food items.
And in energy, trade is also playing a massive role, especially now in the natural gas market. Since Europe is importing its gas through ships instead of pipes.
My second point follows directly from this. The example about gas highlights a fundamental truth about this whole issue:
When there is disruption, everything changes, but some things change more quickly than others. In trade, geopolitics is changing more quickly than logistics is able to adapt to. It takes a day for a gas pipeline to stop flowing; but it takes much longer to build a replacement, be it in the form of LNG terminals, LNG ships, or new secondary pipelines. The same thing we said about any given trade route, no matter the commodity. Value chains are like a forest – it can be destroyed in minutes, but it takes longer to grow. For example: better port management, eCommerce, trade facilitation (such as those provided by UNCTAD) can play a significant role in reducing the cost of trade, but it takes time.
This brings me to my third and final point. And here I would like to echo what the President of the General Assembly said in his address two days ago in this Committee that the world is expecting from us to look at each, and every item of the 2nd Committee through the lenses of crisis management and transformation. He also said that we need strategic focus and bring concrete solutions. If the problem has a trade dimension, then the solution must also have a trade dimension.
This is what we have seen with the two UN-backed Istanbul Agreements we signed with Ukraine, Türkiye and the Russian Federation, and between the UN and the Russian Federation, a process in which UNCTAD, has been deeply involved as well as with the Secretary Generals is Crisis Response Group
So, the opening of the Black Sea grain corridor as well as the efforts to bring food and fertilisers from Russia to the global markets has presided over a six-month consecutive decline in the FAO Food Price Index, a process that began even before the deal was signed, just by the expectation that it could be signed. In a context where trade is very uncertain, signals matter very much – when there is no clarity, no one knows what is going to happen, speculation and hoarding take over.
In total, the FAO Food Price Index has fallen by around 15 per cent since we started. If the World Bank says that 10 million people fall into poverty for every percentage point increase in food prices, then this initiative has had a tremendous welfare effect. This shows the power of trade: by unblocking just one trade route, we have avoided over a hundred million people from falling into poverty.
However, this welfare effect has been tempered by what has been happening in the financial dimension. Increases in interest rates and a stronger dollar led to currency depreciation in most developing countries. Because of this, even though food prices in international terms have declined, this has not always translated into lower prices in domestic terms. This is why, as S-G Guterres says, “there will be no answer to the food crisis without an answer to the financial crisis in developing countries”.
Also, two thirds of the wheat that has left through the corridor for human consumption has gone to Least Developed Countries and developing countries, mainly in Africa. So, this initiative has had not only a welfare price effect, but also direct supply effect which is also very important.
This is why it is important that we renew the Black Sea Grain Initiative, which expires next month. The private sector is anxious about the looming deadline, and as a result wheat prices have started to rise again. We need to renew this initiative as soon as possible, for as long as possible.
However, this is not the only trade solution that we have available. Let me quickly highlight five more:
First, trade restrictions from global suppliers should cease, as they only make things more difficult for everybody. During the 2008 food crisis, half of the price increases were due to trade restrictions. We must be strong and united about this point.
Second, in the context of supply constraints, we must manage demand, especially for energy. Blanket subsidies that allow consumption to continue as normal only solve an issue of affordability in the Global North by producing an issue of accessibility in the South, as scrambles will develop.
Third, we must ensure that farmers have enough to plant the harvest that will feed the world next year. We must facilitate fertilizer exports everywhere and as much as possible, despite the war.
Fourth, shortening supply chains, in particular for food, could increase their resilience and fostering regional supply chains in the context of regional trade agreements, through policy measures in investment, taxation, trade barriers, digitalization and trade logistics could achieve this resilience.
And finally, we need to maintain our perspective in the long-term transformational objectives of agenda 2030 as we take short term actions. We are living today the consequences of not having taken the right decisions before. Let’s not make the same mistake again.
As we embark in this 77th session, let’s keep in mind we can’t solve these crises individually or country by country, we need multilateral and systemic solutions to these crises, while being mindful of the spill over effects of major economies’ national policies on other countries as SIDS, LLDCs, LDCs and other vulnerable countries. This requires
an approach which ensures coherence in the trade, finance, debt and investment items in support of 2030 Agenda across the resolutions.
Your excellencies, dear delegates:
I have said enough. I very much look forward to your contributions to this very important side event.
Let me thank you all again for making the time to come and my divisions on trade and commodities and on tech and logistics for pulling forces together,
Thank you to our people in New York, Dear Chantal Line,
I wish you all a substantive, meaningful – but, above all – impactful session ahead. Thank you.
