CUTS Centre for International Trade, Economics & Environment

U.S. President George W. Bush recently sparked an international fight over fat, after attributing global inflation in food prices to Indians’ eating more. “There are 350 million people in India who are classified as middle class. When you start getting wealth, you start demanding better nutrition and better food,” Bush said during a question-and-answer session in Missouri on May 2. “Demand is high, and that causes the price to go up.”

On one point, Bush is right. According to a World Bank report released April 9, food prices have risen 83% in the past three years. That has provoked riots in Asia, price controls on tortillas in Mexico, and rationing of rice sales in the U.S.

Pradeep S. Mehta, secretary general of the Consumer Unity & Trust Society International, a think-tank in India, quickly weighed in with his own analysis. The food problem has “clearly” been created by Americans: they consume 50% more calories than Indians do, he told the International Herald Tribune on May 12. If Americans were more the size of an average middle-class Indian, he added, “many hungry people in sub-Saharan Africa would find food on their plates.”

To imply that tubby Americans or ravenous Indians chowing their way up the food chain are somehow responsible for inflation on the scale we now see is absurd. However, the Bush versus Mehta fight illustrates a larger point. Policy-makers need to think more intelligently about food and energy policies, particularly the notion underpinning biofuel policy — that farmland should be used to grow fuel. Both the International Monetary Fund and the World Bank have published reports that single out biofuel policies as culprits in the spike in food prices. In April, an expert panel commissioned by the European Union to study the issue called for the EU to freeze its 10% biofuel quota “immediately.”

In Canada, we’re marching in precisely the opposite direction. The federal Conservatives plan to spend $2.2 billion promoting biofuels over the next nine years. Meanwhile, parliamentarians debate Bill C-33, legislation that would mandate 5% biofuel in gasoline in Canada from 2010. It sailed through a first vote on May 1, with support from the Bloc and the Liberals. It awaits a final vote and Senate approval. Before it gets there, though, policy-makers should stop to consider whether enshrining demand for biofuels in law is any smarter than Bush’s fat fight.

This news item can also be viewed at: http://www.canadianbusiness.com

Food crisis: The blame game
Business Line, May 21, 2008

By Pradeep S Mehta and Siddhartha Mitra

The world food crisis, despite all efforts to shift the blame, has been born out of life-style imbalances in the US and like-minded nations, characterised by an excess of nutrition and locomotion, say PRADEEP S. MEHTA and SIDDHARTHA MITRA.

In a series of ignorant and insensitive comments, the US President, Mr George Bush, has blamed the current food scarcity problem and price spiral on the rapid development of India and China. Insensitive because these countries have not even reached 20 per cent of the level of affluence being enjoyed by the US and other developed countries and ignorant because the increased volume of food consumption by India and China is definitely not the primary cause of the price spiral.

Hidden behind the smugness of these comments, a guilt complex possibly lurks — of having engineered a disaster through opulent, wasteful and often gluttonous lifestyles which have taken consumption of food and fuel to unsustainable levels. It is in fact their effort to “sustain the unsustainable” which has led to the current food crisis. This is clear from the Table.

Some statistics

In 1979, according to the FAO Statistical Yearbook, per capita food consumption in the US stood at 3,180 calories — a level of consumption that maintains the body weight of a sedentary human weighing 96 kg. Even at such levels of excess, the US continued to make a fetish and virtue out of increasing levels of consumption.

As a result, around 2003, the average calorie intake had ballooned to 3,770 calories — an 18.5 per cent jump over the 1979 level — which is adequate to sustain a person weighing 114 kg. Though obvious, it deserves mention that such excesses are bad for the US as well. In 2002, 30.4 per cent of the adult population was considered obese by the American Heart Association.

Recent research suggests that obesity can also shorten the lifespan of both adults and children. Besides, obesity is expensive, with the WHO estimating medical expenses on obesity-related problems at 12 per cent of US’ total healthcare costs. The figures in the Table indicate that the average American consumes 1,629 calories more than what is needed to maintain ideal body weight when following a sedentary lifestyle. This implies that even physically active Americans are consuming way more than what they need. Thus, the way for Americans and other developed nations to come out of obesity is to consume less which, in turn, would facilitate better nourishment for the starving and the hungry in developing countries.

The Table also shows that even in many other developed countries, such as Germany, the UK and Australia, an excess of around 1,000 calories are consumed daily. China too has a reasonably large excess intake of over 900 calories, whereas Japan’s over-consumption is modest by developed country standards.

On the other hand, the per capita consumption of India at 2440 calories corresponds to an excess of 462 calories over sedentary consumption needed to maintain ideal body weight. In rural India, where life basically is still non-mechanised, the physical rigour of a bucolic life eats away such tiny surpluses.

The problem of obesity does exist in India but it has not yet reached epidemic proportions as seen in the US; there is still a 20 per cent incidence of under-nourishment.

To top it all, India’s relatively modest level of per capita calorific intake rose only 17.5 per cent in 1979-2002 — slower than that of the US. Therefore, if anything, purely from a consumption point of view Americans are more to blame for stoking inflationary fires in the food sector. Note that African countries bring up the rear as far as calorific consumption is concerned.

Under-nourished Africa

Countries such as Gambia and Ghana, for which data on average height and therefore ideal weight exist, show surpluses of 275 calories and 10 calories over sedentary consumption. With a lifestyle still based on physical movement, at least in the rural areas, even this average calorific intake might denote a state of under-nourishment.

Countries such as Ethiopia and Somalia, for which there are no estimates of average height and ideal body weight, are seemingly worse off with an average calorie consumption of around 1,800. It is this part of the world that scrimps and scrounges while the US and other developed countries splurge.

Declining US exports

The US is also guilty on another account — they have pulled the rug out from under a growing developing world’s feet through a decrease in food exports when the rapid rise of affluence in the latter actually warrants the opposite. Over the 1970s and 1980s wheat exports from the US to the rest of the world almost doubled. In the seventeen years that followed there has been a dip of 24 per cent in wheat exports, much of it being used to produce oil rather than food to maintain an unsustainable fuel guzzling lifestyle.

Such massive decreases in food exports make the US’ claim that bio-fuels explain less than 2/100th of the recent massive rise in food prices seem ridiculous. It is, therefore, interesting and relevant to note that the world food crisis, despite all efforts to shift the blame, has been born out of life style imbalances in the US and like-minded nations — an excess of nutrition and locomotion.

The authors are Secretary-General and Director (Research), CUTS International and can be reached at psm@cuts.org and sm2@cuts.org respectively.

This article can also be viewed at: http://www.thehindubusinessline.com/

He started it! Did not!
www.agweb.com, May 16, 2008

Anyone else see the world food crisis diminishing to a sand box fight? The latest handful of sand was launched from India, where apparently they feel the world blames them for food shortages because of their growing prosperity.

I don't know that anyone is blaming anybody for anything. Rather, the prosperity there should be celebrated, while the world tries to find a way to produce more food to feed a more prosperous world.

A Wednesday afternoon article on the New York Times Web site quoted Pradeep Mehta, secretary general of the center for international trade, economics and the environment for the India-based think tank CUTS International. He threw the proverbial sand in the eyes of Americans, including our own President, who keep trying to explain the reason commodity prices are increasing is due to improved diets and more demand for food around the world. He doesn't like it that we keep saying biofuels are only part of the reason, but a greater reason is the prosperity and subsequent better diets enjoyed by a growing middle class in countries like India. He says that's wrong.

Seemingly, he wiped the sand from his hands, put his hands on his hips, looked at the teacher and said "they started it!"; Mehta says we need to look no further than our own mirrors for the problem to the world's food shortage.

His claim is if the average U.S. citizen will lose a few pounds by simply eating less, we could divert enough food to feed sub-Saharan Africa.

(Pretend here my face is turning red, my hands are on my hips, and I'm about to cry from confusion.) Yeah, well I admit I could lose a few pounds. But...but they eat too, I've always eaten well, and well, they are eating better.

Bruce Scherr, CEO of Informa Economics, estimates1.5 billion people around the world have entered a middle class lifestyle in the last decade. That number is likely to continue increasing as more high-paying jobs originate in developing countries.

Who's blaming them for anything? Shouldn't this be celebrated, albeit there are some hardships we have to work through as a world community?

The rhetoric about the world food crisis is becoming something it never should--a political game of who started it. Maybe the world needs to start looking at the root causes and what needs to happen to fix it.

We are in a situation where worldwide production is on the increase, but because prosperity in countries like Brazil, China, and yes, India, is increasing, people are indeed eating better. That's a fact and it's one of the greatest economic success stories in the history of the world.

We have kinks to work through for sure, but I believe the rhetoric should shift from one of blame to one of problem solving and expansion of world markets to feed the world.

This news item can also be viewed at: http://www.agweb.com/

Oil Shock: Trying to make the complex simple
www.pennlive.com, May 16, 2008

By Herb Field

People want answers. They want to be able to point to something and say that's what caused it. That's as true with the current pain at the pump or higher prices at the supermarket as it is with any other development that impacts our lives. Profiteering oil companies. The shrinking value of the dollar. Speculators. OPEC. Rising consumption in China and India.

Wait a second. Better be careful on that last explanation.

Aside from the fact that too many Americans live in a cocoon that insulates them from most of what's happening in other parts of the world, it probably should not come as too great a shock that there are people in both India and China who object to a country with 5 percent of the world's population consuming close to a quarter of its oil blaming someone else for a jump in oil prices.

A seemingly innocent comment by President Bush's earlier this month in Missouri about India's growing middle class and worldwide rising food prices prompted "scorn" in New Delhi, The New York Times reported May 14. Here's what the president said: "When you start getting wealth, you start demanding better nutrition and better food, and so demand is high, and that cause prices to go up."

One prominent Indian, Pradeep S. Mehta, secretary general of the center for international trade, economics and the environment at CUTS International in New Delhi, according to The Times, said that if Americans slimmed down to the weight of middle-class Indians, "many hungry people in sub-Saharan Africa would find food on their plates." He went to say that the money Americans spend on liposuction to remove excess fat could be used to feed victims of famine.

These are not isolated sentiments. Many people in other countries are offended by what they see as America's gluttony in consuming the planet's finite resources and its insensitivity in failing to respond to such global challenges as climate change and international food shortages. Many Americans think some malevolent force is behind high oil and gas prices. Many foreigners say we are the problem. And they aren't happy about it.

The American way of life does require the expenditure of an inordinate amount of the world's resources. Half of the planet's 6.6 billion people live on less than two dollars a day. Earth simply does not have the resources to permit the rest of mankind to live on the scale of calorie intake, housing and mobility enjoyed by the average American.

But that's today. The way things are headed it should be obvious that America's excesses are not sustainable. We are part of the problem. We need to do more with less. And there isn't really a choice. Those looking for a simple answer need to confront the reality of a world of a still-growing population - a projected additional 2.5 billion people by 2050 - and its finite, ever-shrinking resources from oil to food and much in between.

This news item can also be viewed at: http://blog.pennlive.com/

Beta Beats Alpha
The Daily Reckoning, May 16, 2008

By Bill Bonner

Real investment gains come from being in the right place at the right time.

The most reliable and entertaining trait of humankind is vanity. Despite much evidence to the contrary, men see themselves at the very centre of the universe…the alpha of all creation. Without man, nothing happens…trees fall in the forest, but who cares?

Primitive people imagine that they are to blame for whatever goes wrong – floods…earthquakes…volcanic eruptions; they appease the gods by tossing nubile virgins into volcanoes and building huge monuments of granite in their honour.

Modern people imagine that they are to thank for whatever goes right. Did they not write the Treaty of Versailles…and invent both Long Range Ballistic Missiles as well as Long Term Capital Management? Didn’t they build Las Vegas? And hasn’t Ben Bernanke finally taken the crunch out of the credit cycle?

What follows is basically a lament…a wail…a whining reflection on how we flatter ourselves…and why the most flattered are the best short sale candidates. The short version is that “alpha” is a windy fraud. In broader terms, the moral of the story is simply that whenever you feel proud enough to offer advice to others, you should prepare to get it yourself. Good and hard.

What brought this to mind is a news item from the New York Times. America’s president seems to have an insight. The reason food prices were going up, he guessed, was because people in India had more money in their pockets and now they wanted to eat more. This remark might have gone unnoticed, but for the fact that it was true. The foreigners are getting richer…and uppity. “Asian Age,” of New Delhi, whose name gives you an idea of the way the Indians think things are going, said the US president wouldn’t “get away…with passing the buck on to India.” Others threw biofuels and agricultural subsidies in America’s face. Then, striking low, they said Americans ate too much; if they just slimmed down to the weight of middle-class Indians, said Pradeep S. Mehta, “many hungry people in sub-Saharan Africa would find food on their plates.”

What a revolting development! For four generations, America has been the world’s alpha nation – the country with the money, the power, and the answers. Generations of Americans have offered advice to the rest of the planet, confident that they knew best what was good for everyone. Wilson showed up in Le Havre with his “14 Points” in 1918. Clemenceau remarked sourly that “God only needed 10.” From then until six months ago, the world’s unfortunates had to put up with American know-it-alls. “Tear down this wall,” said Ronald Reagan and the neo-cons. “Dollarise” said Jeffrey Sachs and the Chicago boys. US military “advisors” showed foreign armies and terrorist groups how to kill more efficiently. US businessmen explained how to set up factories and operate them more profitably. (F. W. Taylor introduced ‘scientific management’ …Stalin loved his ideas, which still are known as ‘Taylorism’ in much of the world.)

A long stream of professors handed out trade secrets like chewing gum, confident that the ideas would never stick; foreigners would never really get the hang of it. They urged free-market policies, monetary reforms, and market regulations. Agricultural engineers introduced peasants to pesticides and DDT. And just as 17 th century priests showed the heathen how to copulate correctly, our own world improvers demonstrated to couples all over the world how to copulate without begetting. There was no vanity too absurd…no pretension too embarrassing. By the 1960s, Americans were even sending their children – who hadn’t yet learned a trade or earned a living – in the belief that their callow bodies, in the Peace Corps, might lift the fuzzy wuzzies out of poverty like Pharaoh’s wife plucking Moses up out of the bulrushes.

And then, wouldn’t you know it? The little Moses all over the world took the advice, set up their own shops…and now they’re back-sassing America’s president and stealing its best customers.

And here, for further elaboration, we return to the world of money. While Americans offered advice gratuitously, Wall Street offered its own advice, for a price. The financial industry hotshots said that they, too, had some special magic. Yet, a colleague recently handed us a chart of the London stock market over the last 107 years. What is remarkable about it is that it shows a flattish line beginning over the far left and running right along the bottom for ¾ of the page. Then, after lying in the dirt for ¾ of a century, the chart suddenly springs to life like a locust, in the early ‘80s. In the next 20 years, it shot up more than 1000%.

This same phenomenon is visible in almost any market you choose to look at. There are small gains…and small losses…all the time. But the big gains come all at once. In the gold market, for example, except for occasional war spikes, the price barely budged from the defeat of the Spanish Armada until the 1970s. Then, an investor who bought the stuff in 1972 would have seen his money multiplied 21 times in the next eight years. Following this exertion, gold went back to sleep…and didn’t wake up for another two decades.

The pretence of America is the pretence of Wall Street. It is pretence of alpha itself and the vanity of the species. While Wall Street promised investors elusive, above-market gains - alpha - the real gains came from merely being in the right place at the right time. Beta, in other words. Likewise, it was no special genius that put Americans on top of the world; it was simply being in the right place at the right time. Too bad they can’t stay there.

This news item can also be viewed at: http://www.dailyreckoning.co.uk/

Indians bristle at U.S. criticism on food prices
Tehran Times, May 15, 2008

By Heather Timmons

Instead of blaming India and other developing nations for the rise in food prices, Americans should rethink their energy policy and go on a diet, say a growing number of politicians, economists and academics in New Delhi.

Criticism of the United States has ballooned in India recently, particularly after the Bush administration seemed to blame India’s increasing middle class and prosperity for rising food prices. Critics from India seem to be asking one underlying question: “Why do Americans think they deserve to eat more than Indians?”

The food problem has “clearly” been created by Americans, who are eating 50 percent more calories than the average person in India, said Pradeep Mehta, the secretary general of CUTS Center for International Trade, Economics and Environment, a private economic research organization based in India with offices in Kenya, Zambia, Vietnam and Britain.

If Americans were to slim down to even the middle-class weight in India, “many hungry people in sub-Saharan Africa would find food on their plates,” Mehta said. The money Americans spend on liposuction to get rid of their excess fat could be funneled to famine victims instead, he added.

Developing nations like China and India have long been blamed for everything from the rising cost of commodities to global warming, because they are consuming more goods and fuels than ever before. But Indians from the prime minister’s office on down never fail to point out that per capita, India uses far fewer commodities and pollutes far less than the West, and particularly the United States.

Many Indians felt that the remarks of President George W. Bush on May 2 were more of the same, though this time they seemed to breed a widespread sense of “We’re not going to take this anymore.” During a news conference in Missouri, Bush mentioned India’s growing middle class, and said “when you start getting wealth, you start demanding better nutrition and better food, and so demand is high, and that causes the price to go up.” This came on the heels of a similar statement by Secretary of State Condoleezza Rice that had already upset many in India.

Americans eat an average of 3,770 calories per capita a day, the highest amount in the world, according to data from the UN Food and Agricultural Organization, compared to 2,440 calories in India. They are also the largest per capita consumers in any major economy of beef, the most energy-intensive common food source, according to the U.S. Department of Agriculture. The United States and Canada top the world in oil consumption per person, according to the U.S. Energy Information Administration.

“George Bush has never been known for his knowledge of economics,” Jairam Ramesh, the minister of state for commerce, told The Press Trust of India after Bush’s remarks, which he said proved again how “comprehensively wrong” Bush is.

“To say that demand for food in India is causing increase in global food prices is completely wrong,” Ramesh said.

Politicians and academics in India cite various other reasons: diversion of arable land in the United States and Europe into ethanol production; trade subsidies by the United States and Europe; and the dollar’s decline.

Subsidies to Western farmers have undercut agricultural production in fertile areas of Africa for decades, Kamal Nath, India’s minister for commerce and industry, said by telephone. Meanwhile, he added, Americans waste more food than people in many other countries, in part because they buy in such large quantities.

The United States is responsible “many times more” than India for the world food crisis because of its higher food consumption, said Ramesh Chand, an economist with the Indian Council of Agricultural Research, which advises India’s government on farming policy.

The Bush administration responded to the criticism from India with calls for a truce. Bush is a “great friend and admirer” of India, said David Mulford, the U.S. ambassador to India. He added that he thought “this is a time for increased cooperation among nations to solve this problem and that hostile political commentary is not productive.”

A White House spokesman, Scott Stanzel said, “We think it is a good thing countries are developing, that more and more people have higher standards of living.”

Blaming India’s growth is not only unfair but nonsensical, some economists argue. Food prices have not been continually rising with the growth of the developing world, said Ramgopal Agarwala, a former World Bank economist and senior adviser at RIS, a think tank in New Delhi.

“They were static until 2006, then in 2007 and 2008 there was a sudden spark,” he said. Meanwhile, India’s boom has been happening over the past decade. This is “not last year’s phenomena,” he said.

“I don’t know who advised the president” on his recent comments, Agarwala said, but his analysis is “sub-prime.”

Bush’s “ignorance on most matters is widely known and openly acknowledged by his own countrymen,” The Asian Age argued May 5 in an editorial, but he must not be allowed to “get away” with an attempt to “divert global attention from the truth by passing the buck on to India.”

Mehta said that his remarks on liposuction were meant to be tongue in cheek but that “politically incorrect” attitudes like Bush’s and Rice’s needed to be challenged. Rather than blaming India, Mehta said, the West should be adjusting to the changing world. “If the developing world is going to develop, demand is going to go up and there are going to be new political paradigms,” he said.

This news item can also be viewed at: http://www.tehrantimes.com/

TRANSPORT: Major Hurdle for IBSA Initiative
Inter Press Service News Agency, May 14 , 2008

By Paranjoy Guha Thakurta

NEW DELHI, May 14 (IPS) - As the foreign ministers of India, Brazil and South Africa (IBSA) met in Cape Town on Monday, to take forward a unique initiative in South-South economic cooperation, a gathering of hard-nosed corporate captains from the three countries discussed the absence of adequate transportation facilities among the ‘IBSA’ members.

Brazil’s foreign minister Celso Amorim, who doubles up as his country’s trade minister, had told IPS in an earlier interview that what makes the IBSA grouping unique is that India, Brazil and South Africa (IBSA) are not merely diverse, multi-cultural developing countries but the three countries are all strategically located and important in their respective geographical regions.

However, what the group of businesspersons pointed out was that although there is considerable scope for economic and technical cooperation among the three countries in areas such as energy, mining and aerospace, logistical drawbacks were hampering expansion of trade.

They urged their respective governments to improve air connectivity, maritime transport facilities and ease visa restrictions before the forthcoming IBSA Business Summit that would be held in New Delhi later in the year.

Speaking at a session on tourism organized by the Confederation of Indian Industry (CII), R. Jaishankar, managing director and chief executive officer, UB Group, South Africa -- a large Bangalore-based Indian multinational with interests in liquor and aviation -- pointed out that of the nine million tourists who visited South Africa in 2007 (of which 4 million flew into the country), barely 50,000 tourists came from India.

Over and above high fares, poor air connectivity between India and South Africa discouraged tourists. There is only one flight by one airline between the two countries because of landing rights. Shortage of aircraft, high fuel costs and intense competition on indirect flights compounded the problem.

The session organised by the CII suggested that representatives of the national airlines in the three countries to discuss the issue of limited landing rights given the likely growth in the demand for air travel among the countries.

Specific destinations in the three countries should be marketed more effectively and promoted by the media since tourism has a huge potential to create jobs in all the countries, participants in the session argued, adding that growth in tourism would lead to growth in trade and investment.

It was also recommend by the session that a special IBSA business travel pass be created along the lines of the APEC (Asia Pacific Economic Cooperation) pass to ease issuance of visas, including transit visas.

Not just businesspersons, representatives of civil society organisations also hold similar views. "Economic cooperation between and among countries cannot be successful unless there is a better people-to-people interaction and this can happen only through increased investment and tourism," says Bipul Chatterjee, deputy executive director of CUTS International, a Jaipur (India) based non-governmental think-tank on economic issues.

"IBSA countries should have a policy to issue long-term business visas to investors and to encourage tourism," Chatterjee told IPS in an interview. CUTS (acronym for Consumer Unity and Trust Society) was recently associated with research organisations in South Africa and Brazil to prepare an advocacy document on the IBSA initiative.

Leven Moodley, a representative of Reatile Resources PTY Limited, a South African energy company, said huge opportunities existed among the three countries for cooperation in energy development. Brazil had considerable expertise in production of bio-fuels while India and South Africa had knowledge in generating electricity using coal, wind and water, he said.

All three countries are currently working on technologies for generation and transmission of renewable energy (using the rays of the run, wind and water) and should be exchanging information that would be of great mutual benefit to all, given the sharp increase in world oil prices in recent months.

Sreenivas Kondepudi, vice president, Maytas Infra, part of the India’s Satyam group, said that despite possessing substantial mineral resources, India needs more minerals to cope with the growth in internal demand. While India can invest in iron ore mines in Brazil, it can import coal from South Africa for thermal power projects. He said logistics was the biggest hurdle to be crossed. India could assist Brazil in linking its iron ore mines to ports through railways.

The business delegation presented a memorandum to the Foreign Ministers of the three countries -- Nkosazana Dlamini Zuma of South Africa, Pranab Mukherjee of India and Celso Amorim of Brazil -– recommending government intervention to improve maritime connectivity by having a fresh look at regulatory restrictions. Detailed studies on shipping routes and freight rates should be conducted, it was argued.

Consignments from India and Brazil to South Africa first travel to Europe before reaching their destination because of low volumes of trade, thereby increasing freight costs. Because of similar considerations, that is, low traffic, it is less expensive to fly from India to the United States than to Brazil -- although Brazil is closer in terms of distance.

The other area of cooperation identified by the group of businesspersons was skill development by providing incentives and subsidies to educational institutions in each country. More training programmes could be organized, it was stated.

On the trade and investment front, automobiles and pharmaceuticals were identified as two industries with considerable scope for trilateral cooperation. Despite differing consumer preferences for automobiles in the three countries, there was a case for reduction of tariffs and removal of non-tariff barriers. The corporate executives requested their respective governments to continue to negotiate and ratify trade agreements that would strengthen the economic relationships between the three countries.

This is a complex multilateral process since the agreements would not just relate to the three IBSA countries but many others in regional groupings, such as SACU or the South African Customs Union comprising South Africa, Botswana, Lesotho, Swaziland and Namibia and MERCOSUR or Mercado Común del Sur comprising Brazil, Argentina, Uruguay and Paraguay.

(Bolivia, Chile, Colombia, Ecuador and Peru