About twelve of us met with Fiona on the 13th January 2012, mostly local WDM members but also a few other representatives of local church groups. Prior to the meeting we had sent Fiona a copy of ‘Broken Markets’.
Introduction to the Issues
Andy Welford gave a 15 minute presentation on the issues of food speculation. He approached it from his perspective as a diary farmer. He made a distinction between the historic trading of food stuffs which sometimes involves the advance sales of crops to the end buyer and the recent damaging trading of derivatives by speculators who will never see a crop and have no interest in the end product beyond the profit they can make from it.
He used wheat prices as an example of the increased food price volatility; they more than doubled in 07/08 and then they dropped again, before spiking again 2010. This has caused food prices to rise even in the UK but in developing countries where people can spend up to 80% of their income on food then the result is poverty and starvation. The number of people living in poverty has increased. The Millenium development goals are most unlikely to be achieved.
Part of the problem is the developing country’s dependence on imported food. This has come about because of the free trade ethos. Developing countries were obliged to open their doors to food trading and to cheap imports. At that time the developed countries had food surpluses which they were keen to get rid of but the situation has now changed and there is no longer such a surplus so food is no longer being dumped on developing countries. Unfortunately in the process the developing countries’ own production of staple foods has been damaged so they are no longer able to feed their own people.
It seems that the normal laws of supply and demand are not responsible for causing the spikes in prices that we are seeing. Between 2000 and 2008 the amount of money that has gone into food speculation has increased by 500%. The EU is proposing putting limitations on this activity through the Markets in Financial Instruments Directive – MiFID which is due to be considered by the Parliament and the Commission later this year. We would like it to enforce transparency in the investment activities of banks and other financial institutions and also to impose ‘position limits’ on their involvement in food speculation. It must not be allowed to be watered down by lobbying from the financial sector.
Fiona’s Presentation
Fiona started by stating how grateful she is to WDM for focussing on this issue and for bringing it to her attention. As far as she is aware the other NGO’s are not campaigning on the issue of food speculation. She praised the document ‘Broken Markets’. She said she has found it very useful and that it contains good explanations of the problems.
She pointed out that there are other causes for the recent food shortages: climate change, bio fuels, growing population and changing diet but she agrees that food speculation has added to the difficulties. It is particularly damaging because it results in sudden and unexpected price rises which cannot be planned for.
Fiona is a full member of the Industry, Resource and Energy Committee and she is a substitute on the Development Committee. She has colleagues who are members of the Development Committee who she had spoken to prior to meeting with us. They will be compiling an ‘Own Initiative Report’. This lays out the position and the views of Committee members and tends to influence the direction of future policy. There has also been the Zimmer Report on food speculation and food security. This was published in July 2011. It addressed the role of speculation.
Fiona said that as a result of us contacting her she has researched the matter of MiFID. She has spoken to members of various relevant committees. The ECON Committee is the main committee dealing with MiFID but the Development Committee also has an input.
She explained that the MEP’s are all members of different parties in their own countries but that in the European Parliament they are grouped together into seven main groups. These include the EPP (Right wing), Socialists, ALDE (Liberal Democrats), ECR (Conservatives) and the Greens.
Fiona is going to push to be a Shadow on the Development committee for ALDE. This will mean she could give an opinion on matters and would be able to have more influence on policy, in particular on MiFID. She suggested that WDM head quarters could liaise with her on the best way to carry these issues forward.
Fiona agreed that transparency and openness are needed. In her view America is better at this than the UK is. The problem at the moment is that the Tories are very resistant to any legislation – their instinct is to protect the City.
Fiona also agreed that position limits are necessary. The Regulator should be able to step in and say that there is too much activity and limits should be placed on trading. She says that George Osbourne is particularly resistant to this. He wants ‘alternative arrangements’ for regulating trade but he has not specified what these might be.
MEP’s now have the power to say no to trade agreements. This has increased the lobbying potential for WDM.
In the United States the Dodd Frank law has been introduced to limit food speculation. However, Fiona stated that this in not yet a done deal. It is particularly important that the EU should pass similar legislation in order to encourage the USA to pursue this course of market regulation.
We talked about the Financial Transactions Tax. Fiona is in favour of this, particularly as a means of raising revenue to fulfil the commitments that were made to developing countries to help them to address climate change. It would be a new mechanism for raising money. She suggested that it could be renamed ‘stamp duty’ which would make it more acceptable and cause less resistance. It would be useful if WDM could do some research on the impact of such tax and on the amount of damage that would be caused to the City of London. (It was noted that the local Lib Dem MP for Redcar, Ian Swales, had introduced an Early Day Motion on the subject of a FTT)
Tar Sands is an issue of concern for Fiona. There is a move at the moment to fight for different carbon values to be given to different types of oil, recognising their varying amount of pollution. Canada is very opposed to this. There is also an issue of indirect land use change in relation to biofuels. The EU is lobbying on this.
Summary
Fiona had read the publication ‘Broken Markets’ and she commented on how useful and informative it had been to her and what high quality information it contained. She said that she was very grateful to WDM for providing the information and bringing it to her attention. She also said that WDM appears to be the only NGO which is taking this campaign forward.
She said ‘because you invited me to meet with you I have researched the issues and looked for ways that I can support the food speculation campaign.’
She said she would welcome support from national WDM in the future to guide her about approaches that might be useful. She says she can be contacted by email. Basically she is willing to become very involved in this campaign and is attempting to get herself onto the relevant committees in order that she can influence policy in the future.
We are delighted with how effective our lobbying has been on this occasion. Fiona is willing to work alongside WDM to try to address the issue of food speculation.
Barbara Welford
East Cleveland WDM