December 17, 1998

INVESTING IN AGRICULTURE IN THE DEVELOPING WORLD CAN REAP BIG HARVESTS FOR U.S.

Washington, D.C. - As the impacts of the Asian crisis reverberate around the globe, the major effects that developing countries have on U.S. exports and jobs becomes increasingly clear. Yesterday a panel of experts spoke at the International Food Policy Research Institute to press home how important it is for the United States to invest in agriculture in the developing world. August Schumacher, Jr., the Undersecretary for Farm and Foreign Agricultural Services at the U.S. Department of Agriculture; Jack Eberspacher, the CEO of the National Association of Wheat Growers; and Per Pinstrup-Andersen, the Director General of IFPRI, discussed these issues in depth and debated possible solutions to the growing problems posed by such underinvestment.

In recent years, the United States typically has sent half of its agricultural exports to developing countries, but exports to Asia have now fallen precipitously. In fact, U.S. farm exports to Asia are expected to fall by about 15 percent in 1998. Undersecretary Schumacher noted that “Washington state growers sold more apples to Indonesia than to all of Europe, but now that market has virtually collapsed.” The effects on the American farmer -- not to mention the overall U.S. trade balance -- could be severe. “Wheat growers are really feeling the pinch,” said Eberspacher, and “that is combined with a twenty-year low for wheat prices.”

It was in large part because of this crisis that President Clinton recently announced the $6 billion aid package to farmers, but while the aid is welcome, many of the root causes of the crisis remain. Schumacher warned that, in addition to the Asian crisis, the collapse in Russia combined with an expected softening in Latin American markets could make 1999 “a very tough year.” He added that projections indicate that by next year global trade in agricultural commodities will have declined by nearly $50 billion from its high-water mark in 1996. This represents 15% of all such trade, which is an ominous prospect for major trading countries like the United States.

It is now apparent that growth in U.S. exports is inextricably intertwined with rapid recovery from the Asian crisis and faster growth in the rest of the developing world. As Pinstrup-Andersen pointed out, “we are foregoing an important opportunity by not assisting agriculture in developing countries, because effective aid in this area can lead to greater exports from developed countries, including agricultural exports.” On average, for each dollar increase in their farm output, developing countries spend 73 cents on new imports, including 17 cents on agriculture and 7 cents on cereal imports. Yet investments in developing-country agriculture still receive little attention from donor countries. Schumacher succinctly explained the need to energize agriculture in the developing world, “All ships rise when we stimulate appropriate targeted research in developing-country agriculture.”

The panelists agreed on the importance of rekindling awareness in the global nature of this critical situation, particularly in the developed world, where some people live under the illusion that the Asian effects are local, not global. They also acknowledged that developing countries offer the greatest opportunities for growth in U.S. agricultural trade: “Aid to developing country agriculture, combined with sound policies in the developing countries themselves, can be a win-win proposition,” asserted Pinstrup-Andersen at the conclusion of the discussion.

IFPRI's 2020 Vision for Food, Agriculture, and the Environment was launched in 1994 to develop and promote a vision and an action plan for eradicating hunger and malnutrition while protecting the environment. This initiative brings together researchers, policymakers, and representatives of international organizations and media to examine the challenges to meeting the world's food needs sustainably and to propose solutions.