Dwindling Asian Food Supply and the World Economy

Vol. XIV No. 3

S

tate policies on the acceptance of foreign workers, particularly unskilled labor, are obscure, if not lacking for many countries.

Consequently, there has been an increase of illegal migrants, particularly among women who find themselves exposed to all types of exploitative practices, including prostitution. This is among the glaring issues that exist on international labor migration based on a study "Labor Migration and Its Implications in the APEC Region" made

May-June 1996

world’s two largest exporters of labor -- Mexico and the Philippines -- as well as the world’s three largest destinations of permanent migration -- United States, Canada and Australia. It also includes the world’s most populous economy -- the People’s Republic of China -- and the major economies in the fastest growing region in the world.

APEC therefore is in an ideal situation to respond to the growing debate on whether globalization would slow down or accelerate the present labor migratory pressures.

APEC in the Light of Changes in Labor Migration

by Dr. Rashid Amjad, Director of ILO's Southeast Asia and the Pacific Multidisciplinary Advisory Team (ILO/SEAPAT), which was presented during the recently held Regional Conference of the APEC Study Centers organized by the Philippine APEC Study Centers Network (PASCN) led by the PIDS. According to Dr. Amjad, there is a large number of unresolved and pressing issues surrounding international movements of workers, particularly affecting economies of APEC. APEC includes among its members the

Labor Market Trends Labor markets adjust to the performance of an economy. Where the economy is robust, the demand for labor increases and international migratory movements also increase. Laborimporting countries are not necessarily limited to those facing labor shortage or those with a small population.

In fact, many developing countries have become net importers of labor even before they have reached the level of full employment, or what economists label as the "Lewisian turning point." People are willing to cross na-

ISSN 0115-9097

Inside Understanding Values in Community-Building

2

Culture as a Vital Basis of Resolving Trade Disputes Cases of Trade Disputes

3 6

Dwindling Asian Food Supply and the World Economy

9

Editor's Notes APEC has come a long way. From a nofrills agreement made during an informal meeting of ministers in Canberrra in 1989, it has since become one of the most potent and ambitious attempts to create an Asia-Pacific economic community.

Each year, APEC leaders and other primemovers in 18 member-economies meet to discuss issues, offer commitments and chart plans for a trade and investment liberalization.

The efforts are intended to speed up the commitments made at the Uruguay Round of the General Agreements on Tariffs and Trade or even go beyond if needed.

This is a tall order for each membereconomy, but more so for the chair who is responsible for preparing and orchestrating the activities intended to pursue the objectives of an open global community. This year, that task falls on the Philippines when we play host to the fourth APEC Leaders’ Summit in November in Manila and Subic.

One of the preparatory activities of the APEC in the Philippines is the holding of the F Page 12

tional borders to get to where better job opportunities exist. The demand-pull theory then largely explains the behavior of workers.

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DEVELOPMENT RESEARCH NEWS

2

Understanding Values in

Community-Building

W

henever the topic of Western and Eastern values crops up in conferences, people take on an emotional stance. After all, values are natural gems to a race. People uphold them for others to see and for generations to acquire. They also become a security for a nation to move on to the path of glory.

But can a country impose its values on others even for altruistic reasons? Is there a hard and fast rule on the kind of norms that a society should embrace in order to achieve economic prowess? Can its government sacrifice basic human rights for what it perceives as the right course toward its goal? If indeed Western and Eastern dichotomy is deeply rooted in cultural differences, can there ever be a point of convergence in the context of globalization of trade and investment?

Dr. Jesus Estanislao, President of the University of Asia and the Pacific, presented a useful framework for understanding these issues in his paper "Asian and Western Values: Implications for APEC Community-Building Process" discussed during the recentlyconcluded Regional Conference of the APEC Study Centers Network.

Basic Premises Values are what people desire to achieve. They stir the mind, fire up the imagination and nudge people into action, often in persistent and ceaseless action, until the desired result is achieved. Over time, these ideals are institutionalized and esteemed by a social group.

People are capable of reacting to many common goods using the same faculties of imagination and action.

Thus, it would not come as a surprise if men and women from the East and West find a Creator to adore, an ancestry to venerate, a truth to tell, and the life, honor and property of others to respect. These values spring from the basic fact of being human; hence, they apply to all humans. These are called universal values for it is possible to generalize their application.

There must be a litany of such universal values. The United Nations has formal declarations and international conventions on human, civil and political rights. The Commission for a New Asia has articulated the fundamental values that must brace the construction of an Asian order that is responsive to and responsible for a harmonious and progressive international order.

However, people do not live in an abstract world of ideas. While they have long-term, strategic and fundamental values, they have to grapple with day-to-day realities; thus, they create short-term, operational and concrete targets which are conditioned by time, place and other circumstances.

For instance, there was a widespread support for order and sacrifice for development in the 1970s, but in the 1980s, a greater premium was placed on personal freedom and restoration of democracy. Moreover, the goods that are important to a young person with full life are markedly different from those of a dying person. What may be revered in one place could be considered absurd in another place.

May-June 1996 Demystifying the East-West Dichotomy To acknowledge the relative changes on how values work to different people at different times, places and circumstances is to recognize that there are differences between the East and the West. The priorities today in the East may well be hard work, thrift, respect for authority, and sacrifice for development. Those in the West may be interpreted as leisure, conspicuous consumption, license and contention even against authority, and personal gratification.

The truth, however, is that values are not exclusively “Eastern” or “Western.” The first set of priorities have worked well for the progress of many societies, therefore, those aiming to develop could emulate them. The second set of values, meanwhile, are universal vices which everyone, again from both East and West, should try to mimimize or avoid altogether.

To Each Its Own The values of order and sacrifice for economic development may be paramount for one society at a given time of its history. To secure order, it may curtail some civil liberties. It may even impose some curbs on freedom of expression. But the gains could well be worth the sacrifice.

On the other hand, a society may pursue a different set of priorities. The value of freedom and responsibility of defending and spreading democracy, as it understands and practices it, may be the most important priority. It may insist on civil liberties, including the right to openly express dissent and criticism against public authority.

To each its own, for as long as basic, universal values are not infringed upon. Each society should be able to set its own priorities according to the values it considers most important for its progress. There should be no problem if one society puts a very high premium on order and sacrifice to achieve economic growth, and another society gives stress on freedom and democracy.

The problem arises when one society

DEVELOPMENT RESEARCH NEWS

C

ulture is an important aspect to consider when examining how nations behave in making choices.

This is particularly useful in the context of the increasing integration of world markets and the cross-cultural interaction that goes with it. A necessary way to understand how individuals and groups make conflicting choices is to examine national attitudes and institutional arrangements used to resolve disputes and serious accusations.

This is the essence of the paper entitled “Cultural Aspects of Trade Dispute Resolution” presented by Dr. Pitman Potter of the Asia Pacific Foundation of Canada during the Regional Conference of the APEC Study Centers held on May 9-10, 1996 at the Holiday Inn Manila Pavilion. The study outlines the various ways in which culturally influenced attitudes and behavior can shape the foundation for support

3

May-June 1996

Culture as a Vital Basis of Resolving

Trade Disputes

of the major processes used to resolve economic disputes.

According to the author, “no nation, no firm is totally free in pursuing its interests without considering others.” Parties to an international transaction must therefore acknowledge cultural differences and take them into account. This is most ideal, but the ideal does not always happen. Very often, the hidden cultural premises which form the bases of human behavior obstruct any effort to understand others.

A Lens to View the World Culture consists of empirical beliefs, expressive symbols and values

C o m m o n thread: People from East and West may manifest different values but they certainly share a basic fact of being human -they have a creator to adore, an ancestry to venerate, and life and honor to protect. tries to hold up its own values and judge others by those values. It may become worse if one society preaches to another, or even worst, if both societies impose their values on one another.

Meeting of Twain The differences in values may spark more problems if there is little interaction between and among soci-

eties. Fortunately, current trends provide for greater interaction such that the modes of thinking, expressing and living have come to spread quickly across borders. The mass media have become powerful instruments for universalizing certain elements of modern life, especially among the younger generation.

They listen to the same type of music, watch virtually the same TV programs, and read the same stories, news and ads.

which define actions. It is the lens through which we view the world, the logic which it is ordered, and the language by which it is understood.

Treated in such a fashion, we communicate, develop and perpetuate knowledge about the world. Over time, we form a repertoire of behavior, a collection of widely shared but often tacit set of social conventions, and a series of beliefs which limit our views of others.

Culture changes with time, either intentionally or as a natural consequence. What might have been a taboo in early times, may have become accepted in later times. Some tradi-

F Page 6

Universalizing tendencies are not necessarily the monopoly of mass media. Advancement in telecommunications and transportation have made possible the exchange of ideas, views and information among hundreds of thousands of analysts, policymakers and the general public. Liberalization of trade and investment allows traders, brokers and investors to broaden their reach to a seemingly interconnected market.

Meanwhile, authoritarian control also breeds uniformity. Whether out of deep respect for authority or fear of getting reprisal for showing disrespect, most citizens in an authoritarian society generally conform to what is “officially accepted.”

Thus, while differences exist across societies, many similarities are emerging. The globalizing trends are working toward some convergence, or the meeting of the twain (East and West), so to speak. As interaction becomes more intense, the similarities are

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DEVELOPMENT RESEARCH NEWS

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May-June 1996

APEC...Labor Migration E

Page 1

ILO estimates that there are around 35 to 40 million migrants who are economically active somewhere around the globe, and they are accompanied by at least as many dependents (Table 1). No precise and comprehensive classification can capture the variety of today’s migrants. The former distinction between temporary and permanent migrants has become blurred. What has become useful for classification is the presence of skills (or lack of it) among migrants. For example, unskilled or semi-skilled workers who leave permanently or temporarily represent a sizeable portion of cross-border migrants, as well as skilled industrial or construction workers who move individually or as part of an enterprise’s labor force. Highly qualified professionals and managers have likewise become more mobile than ever. There is also a small but significant number of young people who move around to upgrade their skills.

They are either on their own or are sponsored by their firms or governments.

Come what may. Unskilled workers are vulnerable to exploitation especially in a foreign land where they risk life and limb to earn a few bucks.

Movement of Workers in APEC In examining labor flows in the APEC region, it is convenient to divide the member-economies into three broad categories.

The first category comprises the major destinations for permanent migration, namely, the United States, Canada, and Australia, to which New Zealand can also be added. The United States receives more migrants than any other country. It also allows in a large number of temporary migrants, mainly

Table 1 Estimate of Nonnationals by Region in 1990 (In millions) Region

Economically Dependents Active

Africa

5-6

Americas, North

Total

11-14

16-20

7

8-10

15-17

Americas, Central and South

3-5

4-7

7-12

Asia, South, Southeast and East

1-3

3-4

4-7

Asia, West (Arab States)

6

2-3

8-9

Europe (excluding the USSR)

8

Total

30-35

12

20

40-50

70-85

from Mexico. Immigration policy in Canada, on the other hand, is more closely regulated than that in the United States; that in Australia, meanwhile, has shifted substantially in favor of Asia since the 1970s in response to the realization that Australia’s future will be closely influenced by socioeconomic changes in the region.

A significant portion of the migration stream to these countries are from the Asia-Pacific rim and mainly from APEC member-economies.

For these countries, the problem of illegal migrants is the most serious concern, followed by anti-immigration public sentiments especially during periods of economic recession and high domestic unemployment. The issue of immigration, especially in the context of globalization, also raises the question of how to attract highly skilled workers and increase inflow of foreigners with extraordinary ability without the need for prearranged employment or nomination by an employer.

The second category includes economies which are dominated by intra-Asian flows of migrant workers.

Three streams of labor flow can be distinguished from here, and each of these has expanded rapidly in the past decade. The first and fastest growing is between developing Southeast Asia and industrial Asia. The second is within Southeast Asia, and the third is among the Northeast Asia countries.

DEVELOPMENT RESEARCH NEWS

The first stream involves the flow of mostly unskilled, legal and illegal workers from Southeast and South Asia into Northeast Asia, mainly Hongkong, Taiwan/China and Japan and also the flow of skilled and professional workers in the opposite direction. The labor migration flows are much more complex among the Southeast Asian economies. Labor flows into Singapore mainly from Indonesia, Malaysia, Philippines and Thailand. The emergence of growth triangles has likewise increased the flow of labor among these countries.

The third category covers labor movements within Latin America and the Caribbean. Although Mexico and Chile are at present the only APEC

5

May-June 1996

members in this category, labor movements in Latin America would give a good picture of the dynamism of the region and its future prospects. Perhaps, one discernible trend is the slowdown in immigration flows in this region.

Features of Intra-Asian Labor Flows In all the major labor-receiving Asian economies, the major cause for the rapidly rising migration is labor shortages that result from the fast growing economies which could not be met by a relatively slow-growing labor force.

In the context of intra-Asian labor migration, there are some distinct features and problems encountered.

For one, a significant feature of the rapid economic transformation of East and Southeast Asian economies has been the accompanying growth of labor migration which increased from approximately just over a million in the early 1980s to over 3 million in the mid1990s.

Although labor migration has grown rapidly in the region, only three economies, namely, Malaysia, Singapore and Taiwan/China have statutes which provide for the admission of unskilled foreign labor. State policies on the admission of foreign workers are primarily based on the idea of providing flexibility in the labor mar-

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Table 2 Estimate of the Movements of Highly Skilled Labor and Service Providers Nationals Abroad Country or Region

Business Travels

Short-term Provision of Services

Temporary Residence of Highly Skilled Foreigners

Expatriate

Long-term Highly Skilled Migrants

Australia

-

-

35,000

People's Republic of China

-

-

10,000 (construction sector)

Hong Kong

-

-

87,000

Japan

1,025,000 (1988/89)

5,000

85,000

South Korea

315,000 (1988/89)

-

87,000

Indonesia

-

-

Malaysia

-

-

Philippines

60,000

Singapore

-

-

Taiwan/ China

-

-

Thailand

-

-

Source: Gamier (1996).

35,000 (Hong Kong)

Business Short-term New Entry Posted Travels Provision of Expatriates of Services Expatriates 202,000

13,000

-

12,500

1993-94

-

-

-

-

recently

-

-

6,500

50,000

1991

-

-

-

21,000

64,000

1992

-

-

-

18,260

-

1992

-

36,000

20,000

52,000

10,000

40,000

-

-

40,000

100,000

-

-

10,000

20,000

-

-

-

-

-

-

120,000

-

Year

8,200

1993 61,300

1993 1994

7,500

50,000

1990

-

-

1992

36,600

-

DEVELOPMENT RESEARCH NEWS

APEC...Labor Migration E

Page 5

ket. Foreign workers are seen as "filling in the gaps" and thus work permits are limited to short periods. Due to ambivalent migration policies, illegal migrants have increased in number and are increasingly exposed to all types of exploitative practices.

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May-June 1996

of changes in migration trends over the past years suggests a cause for a global migration policy to develop.

There has never been a consensus on whether movements of people are good or bad for the economy nor on how to deal with these movements. Neither is there a clear indication that the flow of labor across countries would increase with globalization. Globalization, as it stands today, primarily involves greater

Feminization of labor: There is a high demand for skilled workers among women in such industries as electronics. A set of standard rules on labor migration would help safeguard their welfare.

Finally, there has been a growing feminization of Asian labor migration, with more than half of the migrants from the Philippines and Indonesia being women. According to a recent ILO study, among the industries fueling demand for Asian female workers, “entertainment,” frequently a euphemism for prostitution, has topped the list.

Outright prostitution is widespread and in many cases, women contracted to work in legitimate jobs are forced into prostitution. Women in any occupation who enter a foreign country illegally or overstay their visas are subject to exploitation. The so-called entertainers, however, are the most vulnerable.

APEC’s Role in Labor Migration Labor markets have functioned well in the past despite the lack of an institutional framework. Yet the extent

movement of trade and investment.

But what is more interesting about labor flows are the structural changes in the demographic makeup or in the attitude towards work by the labor force.

Already, focus on human resources development in APEC deliberations may be considered as something that would help improve the needed skills to facilitate the movement of capital, goods and services.

However, the more critical issue of how governments can learn from each other’s experiences to manage and cope better with legal and illegal flows of labor, especially to afford better protection to migrant workers, remains a challenge. Certainly, APEC can contribute to the debate in search for measures that would ensure a more orderly and humane movement of labor across national boundaries. DRN

Culture as a Vital Basis...

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Page 3

tions are maintained while others are discarded. Thus, culture is as much a conscious choice as it is the product of history and spontaneous socialization.

Culture and Disputes It is difficult to measure how culture operates in any particular situation. Even experts are far from having a full grip of its relation to, say, dispute resolution. Raging debate and terminological confusion are rampant in both the theoretical and descriptive literature regarding how best to define and assess the weight of cultural factors in the context of political, economic and legal activities. In the language of the social sciences, should culture be seen as an “independent” variable, the single most important explanation of how to understand the other side, or should culture be viewed as an “intervening” variable to make do when nothing else seems to explain what has happened?

Still, it should not be an excuse to ignore altogether the possibility of developing a yardstick in social and eco-

Case I: Government-to-government trade dispute.. The trade dispute between China and the United States on intellectual property rights or IPRs (e.g., patents and copyrights protection on computer software, chemical substances and compact discs) is useful in illuminating the cultural dynamics of government-to-government disputes. It involves the various Memoranda of Understanding (MOU) between the two countries dated 1989, 1992, and 1995 in which the U.S. imposed specific obligations on China to improve its IPR regime, in return for which, the U.S. agreed not to impose costly tariffs on Chinese imports.

The MOUs reflect U.S. and Chinese efforts to resolve trade differences through

DEVELOPMENT RESEARCH NEWS

nomic behavior. A sensible paradigm can help sort out cross-cultural issues as they relate to interactions between and among governments and firms around the globe. Such would mould a thinking on how best to avoid disputes, how legal rules and institutions should operate in their settlement and how agreements or compromises could become binding.

The cultural context of disputes involves a broad extent of cultural norms as well as specific attributes of legal culture in the societies concerned.

It is always useful to consider the levels of society and the dynamics by which culture is manifested and manipulated.

Levels of culture correspond to different levels of society such as the elites, professional and middle class, working class and so-called “underprivileged� or structurally impoverished groups. Manifestations of culture can take many forms including direct expression, perception or interpretation, and other aspects of behavior which in turn may be affected by varying degrees of formality and informality in social relations. The manipulation of culture often involves the role of appearances in presenting norms and traditions to outside parties for these have some explanatory value.

7

Minimizing trade conflicts: Globalization through the aid of technology would help attain convergence across culture, thus, preventing trade disputes.

Approaching Disputes in Trade Trade disputes are conflicts that arise from the exchange of goods, services, technology, financial resources and other items of exchange.

They must be significant enough to motivate one or two parties to consider the use of institutionalized resolution mechanisms.

In examining trade disputes, a number of operational issues arise.

These may be classified as concerning

May-June 1996

emergence, conduct and resolution. Analysis of the emergence of trade dispute entails discussion of attendant circumstances, cause, issues in dispute, nature of parties and other matters that affect the dispute. The conduct of dispute entails such matters as processes of negotiation, position taken by parties at various stages, institutions involved, and other matters attendant to the dispute after it has arisen. Resolution of dispute entails issues concerning institutions and processses for bringing a dispute to a close.

There are at present three distinct categories of trade disputes: (1) government-to-government disputes; (2) private-to-government disputes; and (3) private-to-private disputes (see boxed article for examples). These may not be the best way to classify trade disputes for they overlook other forms of institutions. Nonetheless, the current dispute resolution organizations generally adhere to these classifications. Government-to-government disputes are often handled in the context

F Page 8

Cases of Trade Disputes bilateral negotiation without intervention of multilateral dispute resolution organizations.

However, the perspectives of the two governments are quite different. The U.S., on the one hand, has chosen to incorporate trade sanctioning mechanisms into its trade laws and then use these as a basis for extracting concessions from China. The Chinese, on the other hand, view negotiated agreements as part of a long-term process of relationship building, entailing broad

agreements to general principles rather than specific commitments.

The U.S.-China disputes over IPRs reflect a combination of commercial interest and cultural difference. Chinese negotiators have repeatedly argued that problems with IPR enforcement in China stem from traditional cultural values. The U.S. negotiators, meanwhile, have chosen to emphasize the commercial interests of local enterprises and government officials.

Case 2: Private-to-government trade dispute. The Beijing Jeep case is well-known as one of the first major investment project disputes between a foreign firm and the Chinese government.

The well-known dispute between American Motors Corporation (AMC) and the Chinese government over the AMC Beijing Jeep joint venture stems from AMC’s alleged F Page 8

DEVELOPMENT RESEARCH NEWS

Culture as a Vital Basis...

E

Page 7

of GATT-WTO panels; private-to-government disputes, by the International Centre for the Settlement of Investment Disputes; and private-to-private, through a variety of commercial arbitration tribunals.

Still No Guarantee International trade disputes generally involve more than one political and legal system, thus complicating the resolution processes.

Disagreements often emerge regarding appropriate legal jurisdictions and the extent to which governments should be involved. In-

Cases of Trade...

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Page 7

rights to convert the Chinese currency proceeds of its domestic sales into foreign currency that could be repatriated. The willingness of the Chinese joint venture party and related government entities to assist in this process was undermined by disappointment over AMC’s plans to import complete knock-down (CKD) kits for Jeep Cherokees to be assembled in China. The Chinese side had thought that the joint venture would entail design and production of a completely new Chinese jeep.

The dispute erupted largely because of the differences in conceptions about the nature of technology and the extent of mutual commitment among the joint venture parties. The Chinese viewed the joint venture contract not as a formal limitation on the legal relationship with AMC, but merely as an expression of a broader commitment to mutual assistance. While the contract appeared to favor AMC, the Chinese side concluded that AMC’s CKD plan violated a basic moral commitment to assist the Chinese in developing a new jeep. Ultimately, a solution that embodied some elements of both sides was achieved, but not until high level officials intervened. AMC agreed to deliver additional technology in the form of training and equipment while the Chinese formally agreed to assist with currency conversion and repatriation of profits.

8

ternational regimes can often invoke compliance with international agreements by establishing legitimate standards of behavior for states and firms to follow. However, international legal system is frequently unable to compel the resolution of a dispute because there is no supranatural legislature to promulgate rules of international law and no international court has compulsory jurisdiction over trade disputes.

In the end, the choice for a firm or a country to adopt any dispute resolution process goes beyond strict rational calculation, exigencies of the law or the potential use of political power.

Human behavior, including any effort to understand others, will still be influenced by culture. DRN

Case 3: Private-to-private trade dispute. Disputes also arise in a number of private-to-private transactions over fundamental differences in expectations or changes in the contractual agreements between the parties. Take this example: In the sale of glass by a Chinese factory to a U.S. customer, the buyer claimed that the product delivered failed to comply with the contractual requirements for sale of transparent glass. However, upon investigation and in the light of Chinese regulatory requirements, it was determined that the contract terms were vague, and in the absence of state and industry-wide standards, the terms of sale could be defined by reference to the standards of the seller.

The glass delivered was found to be in compliance with the seller’s standards even though an international consulting firm found it to be of “no commercial value.”

Despite the appearances of a violation of apparent standards of good faith (i.e., the foreign purchaser expected that the term “transparent glass” was self-evident but the seller maintained that “transparent glass” need not be transparent and is so permitted by the producing firm’s quality standards), the arbiters concluded that the issues of quality should be subject to formal definitions even if these contradict appearances. The basis for the dispute revolved around substantive and formalistic standards of quality; that for resolving the dispute, on the other hand, stems more on the legalistic content of contract. DRN

May-June 1996

T

he changing environment in the Asian region, especially in the context of population growth, rapid industrialization and urbanization has moved experts to examine the adequacy of food supply in the region.

Although overall food production in Asia increased by 3 percent annually during 1980-1994, several Asian countries have recently experienced a slowdown in the growth of the production of grains. Most notable is Chinese cereal production, which has stagnated or even declined since 1990. China, the world’s largest consumer of grains, became a net importer of this commodity in 1995. Following China, Indonesia, the Philippines and Korea became net importers of rice. Thailand, the largest supplier of rice in the world, recorded negative growth rates for rice production between 1985 and 1993 (see Table 1). If this trend continues, Asia may become a net importer of rice in the future. In view of the shortfall, who will supply the much-needed grain?

This is a question posed in a paper by Dr. Hiroshi Kakazu entitled “Changing Agricultural Environments in Asia with Particular Emphasis on Cereal Production in China” which was presented during the Regional Conference of the APEC Study Centers on May 9-10 at the Holiday Inn Manila Pavilion Hotel.

Will China Starve the World?

Agricultural economists generally predict, although in varying degrees, a shortfall in Asian food supply, especially in countries which have experienced rapid industrialization such as China and the members of the Association of South East Asian Nations (ASEAN).

Analyst Lester Brown is the most pessimistic with China. He projects a shortfall by 2030 ranging from 216 to 378 million tons. However, the projection parameters used relating to population growth and expected cereal production are, according to some quarters, contestable.

DEVELOPMENT RESEARCH NEWS

9

May-June 1996

Dwindling

On the other hand, forecasts by the Overseas Economic Cooperation Fund (OECF) project a shortage in cereal supply of only 24 million tons and 136 million tons by the years 2000 and 2040, respectively. Furthermore, other institutions such as the Food and Agriculture Organization (FAO), International Rice Research Institute (IRRI), World Bank and International Food Policy Research Institute (IFPRI) foresee Chinese cereal production to grow from the current level of 340 million tons to 475 million tons in 2010.

Barring all considerations with the numbers and methodologies used in the projections, it is said that China will not starve the world.

But any policy stance the Chinese government may take in the future in relation to food or cereal production would have a significant influence on cereal supply not only in the Asian region but in the global context.

Asian Food Supply and the World Economy Food Security and Self-Sufficiency National food security in view of the growing international inter-dependence is a hotly contested issue. Can a country secure its food supply without being self-sufficient?

If nations adopt the policy of food self-sufficiency, is there guarantee that they would not shelter their agriculture from competition?

For decades, experts have tried to define these two concepts and assigned indices for better monitoring.

Many now agree that food security is different from food self-sufficiency, but both are relevant in their own context.

Particularly from an Asian perspective, an important consideration is the adoption of measures toward agricultural modernization.

Densely populated countries like India, Bangladesh

Table 1 Cereal Production in Selected Asian Countries, 1985-1994

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

Volume (in MT) World Asia DMCs China India Indonesia Thailand Bangladesh Myanmar Philippines Pakistan

F Page 10

Average Annual Growth (%)

1,826,989

1,837,306

1,769,295

1,726,594

1,870,299

1,947,396

1,879,404

1,960,582

1,889,254

1,956,643

0.8

685,964

700,746

719,241

747,465

786,922

825,475

799,319

839,676

841,141

839,131

2.3

336,761 165,682 43,364 25,613 24,135 15,100 12,728 17,700

349,164 164,955 45,647 23,400 24,266 14,861 13,338 20,866

356,366 156,114 45,234 21,414 24,304 14,239 12,818 18,454

348,997 183,867 48,328 26,167 24,450 13,645 13,399 19,240

364,820 199,413 50,918 25,240 27,886 14,256 13,981 21,018

401,629 193,919 51,913 21,170 27,747 14,421 14,739 20,957

392,306 193,101 50,944 23,873 28,462 13,649 14,329 21,138

397,678 201,923 56,236 24,127 28,654 15,340 13,688 22,117

403,150 204,813 54,651 22,276 28,175 17,260 14,332 23,805

394,020 211,522 53,811 22,507 28,734 19,607 15,550 22,445

1.8 2.8 2.4 -1.4 2.0 2.9 2.3 2.7

Volume (in %; 1990 = 100%) World

93.8

94.3

90.9

88.7

96.0

100.0

96.5

100.7

97.0

100.5

Asia DMCs

83.1

84.9

87.1

90.5

95.3

100.0

96.8

101.7

101.9

101.7

83.8 85.4 83.5 121.0 87.0 104.7 86.4 84.5

86.9 85.1 87.9 110.5 87.5 103.1 90.5 99.6

88.7 80.5 87.1 101.2 87.6 98.7 87.0 88.1

86.9 94.8 93.1 123.6 88.1 94.6 90.9 91.8

90.8 102.8 98.1 119.2 100.5 98.9 94.9 100.3

100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

97.7 99.6 98.1 112.8 102.6 94.6 97.2 100.9

99.0 104.1 108.3 114.0 103.3 106.4 92.9 105.5

100.4 105.6 105.3 105.2 101.5 119.7 97.2 113.6

98.1 109.1 103.7 106.3 103.6 136.0 105.5 107.1

China India Indonesia Thailand Bangladesh Myanmar Philippines Pakistan Sources:

Computed from FAO, Basic Data Unit.

DEVELOPMENT RESEARCH NEWS

Dwindling Asian Food...

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and China must modernize their agriculture in order to alleviate poverty. At the same time, they must industrialize to absorb labor surplus from the modernized agriculture sector and to provide it with the needed inputs. The experiences of Japan and the newly industrialized economies (NIEs) bear out these two requisites to a modern agriculture (see Figure 1).

There are three inputs for a modern agriculture: fertilizer, machineries and modern plant varieties. The use of intensive fertilizer has been the most important factor in increasing per hectare yield. In a study conducted by Hossain (1994), fertilizer input determined between 70 to 80 percent of per hectare yield.

Machinery intensiveness, on the other hand, has been pro-

10

production are largely due to the following factors: Diminishing trend of arable land.

The growth rate of new per capita arable land has been declining since the 1960s especially in developed countries in Europe and in heavily populated Asian countries such as China and India. The growth rate of cropped land has decreased even more dramatically, especially in China where growth rate declined from 2.79 percent in the 1970s to -0.17 percent in the 1980s. The reasons behind these are -t rapid industrialization and urbanization, t increasing rate of population growth, and t the resulting conversion of crop land to industrial and housing sites.

Slowed growth rate in per hectare yield. With the declining growth in ar-

Golden grain on the slope: Asian production of cereals, particularly rice, has been dwindling over the past years. Can the trend be arrested? Should it be a grave concern in the first place?

gressing very rapidly particularly in the East Asian context. The use of modern plant varieties has also increased per hectare yield between 1960s and 1970s.

Constraints on Cereal Production Other than short-run factors such as floods and drought as well as stagnated commodity prices, major causes of the declining growth rate of food

able land, the future of Asian food supply would depend largely on land productivity.

Although the per hectare yield increased 2.3 percent for rice, 3.7 percent for wheat, and 2.9 percent for maize annually during the 1960s, the next two decades experienced a considerable decline in growth rates for rice and maize with less than 2 percent average annual growth. While India has continually increased the produc-

May-June 1996

tive capacity of its land during the 1970s and 1980s, Chinese growth rate went down from 4.2 percent to 2 percent during this period.

Slow response of fertilizer inputs.

Fertilizer is the dominant factor which determines yield-per-hectare.

Since the fertilizer-paddy price ratio is still lower than yield-fertilizer ratio, high growth rates in the use of fertilizer for Asian developing countries are to be expected, especially for Thailand, Philippines and Vietnam, where a high grain-fertilizer response ratio is found.

On the other hand, fertilizer use is not seen to increase in China due to an almost negligible grain-fertilizer response ratio.

Excessive use of chemical fertilizers and pesticides, however, are expected to yield diminishing returns over the long run because they sap the land of its natural elements and cause the evolution of resistant pests.

There is also a notable decline in the adoption of modern varieties of rice which are more responsive to fertilizer use. In most Asian countries, the rate of adoption of these modern varieties is diminishing. In fact, China, which adopted 100 percent of modern varieties, is now reverting to traditional varieties because of consumers’ preference.

Low and stagnated prices of cereal.

The stagnation or decline of world cereal production can also be attributed to low and stagnated absolute as well as relative prices, which in turn are due to the lowering of production costs following the diffusion of improved production technology.

Moreover, it is deemed unlikely that food production will increase in accordance with a price increase because of the diminishing rate of production response to the price change. For some Asian countries, particularly those in East Asia countries such as Japan, the existence of high tariff and nontariff barriers has largely contributed to this slow response in production to changing prices. Agricultural prices have likewise failed to keep up with inflation. In China, for

DEVELOPMENT RESEARCH NEWS

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May-June 1996

Figure 1 A Mechanism of East Asian Agricultural Development Industrialization

Initial Conditions

Trade and Development

Rise in agricultural productivity Population pressure >

Agricultural modernization

Limited supply of arable land

Fertilizer-intensive >

Machinery-intensive

Surplus in > agricultural products

^ (supply of industrial inputs) >

Industrialization

Deterioration of terms of trade

imports of > agricultural products ^

Stagnated agricultural prices

Modern varieties

Low per capita income

>

Exports of labor-intensive products >

^ Imports of capital goods

>

Further specialization in industrial products and exports (WTO, APEC, AFTA)

Source: H. Kakazu, 1995.

example, state grain purchase prices remained unchanged in 1995 despite a 24 percent inflation rate.

Environmental disruptions and water shortage.

Environmental degradation is becoming a serious issue especially in view of the rapid industrialization occurring in the Asian region.

The shifting priority to allocate fresh water for industries instead of agriculture has raised concerns regarding the declining sources for irrigation.

Shift in taste. Asian cereal production has followed Engel’s law, such that per capita consumption increases in low-income countries while it decreases as income rises. In view of rising incomes in the rapidly industrializing Asian region, the share of basic staples such as rice decreases as income increases because the consumer diversifies to other higher priced commodities such as beef and pork. This would push the demand for feedgrains faster than the demand for direct consumption of grains.

The Uruguay Round Agreement (URA). The measures adopted in the URA such as the conversion of nontariff barriers to tariffs and the reduction of tariffs are seen to have a progressive impact on cereal production in the Asian region.

Many experts predict that the market-oriented agricultural policy under the URA will stimulate production and exports in Thailand, Canada and Australia.

The capacity of economies to cope up with the fast pace of development in Asia would rely on their ability to address the factors behind the declining growth of cereal production in the region. But as pointed out by Drs. Hiroshi Yamauchi of the University of Hawaii and Cristina David of PIDS in their comments to the issues raised in Dr. Kakazu’s paper, the projected differences in the magnitude of shortfall on cereal production per se bears little significant. The more important considerations is its impact on the world economy. Asia will definitely become

a net importer of grains, but world prices of grains will not exceed 10 percent, according to David. Besides, as shown by a World Bank study, free trade in agriculture is "unclear."

Nonetheless, given the GATTWTO framework (free trade), national decisionmakers have to worry about how countries develop and lose comparative advantge in agriculture and what adjustment measures countries can adopt to alleviate the burden of these changes. The most important, as Yamauchi says, is how to reorient people’s values on national food security. Self-sufficiency in food may no longer be acceptable, but the more valid concern is the possibility that food supply will be concentrated in a few large countries and that the distribution will be determined by economic and political factors without regard for welfare effects.

If this happens, are there institutional mechanisms to safeguard the interests of the “small” countries? DRN

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May-June 1996

Editor's Notes E

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Regional Conference of the APEC Study Centers Network (ASCN) on May 9-10, 1996. The Network, a brainchild of the APEC leaders who met in Seattle in November 1993, is meant to stir universities and research institutions into taking up APEC-related issues in their research agenda and academic curricula in order to contribute to greater understanding among member-economies.

Understanding Values...

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Page 3

likely to increase and assume an increasingly greater weight relative to the differences that will remain nonetheless.

Moving Ahead The levelling of differences between Eastern and Western values may not guarantee that economic growth would flow from developed to less developed countries. Moreover, even if economic growth has brought material prosperity and self-confidence to many, it has not necessarily led to social progress.

In this issue, we tackle three major issues in the APEC region, which were presented and discussed during the two-day conference. These are on labor migration, cultural aspect of trade dispute and Asian food supply. We also feature some of the key points discussed in a paper focusing on the role of values in community-building.

To the APEC advocates we say, “go on.” The fruits of a long and hard toil may soon be forthcoming.

Vol. XIV No. 3

May-June 1996

Editorial Board Dr. Ponciano S. Intal, Jr. President Dr. Mario B. Lamberte Vice-President Ms. Jennifer P.T. Liguton Director for Research Information

Perhaps, the best strategy is for economies from the East and West to foster values that would ensure and sustain long-term economic growth and social progress such as the spirit of enterpreneurship and self-restraint.

If values would be assessed by their end result, those that lead to the development of more people are more desirable than those that lead to the development of a few.

APEC is a promising institution.

It offers many avenues for interactions, thereby leading to an understanding of the divergence in culture and values, and possibly congruence of mechanisms and processes that promote positive values for a greater number of p e o p l e . DRN

DEVELOPMENT RESEARCH NEWS is a bi-monthly publication of the PHILIPPINE INSTITUTE FOR DEVELOPMENT STUDIES (PIDS). It highlights the findings and recommendations of PIDS research projects and important policy issues discussed during PIDS seminars.

PIDS is a nonstock, nonprofit government research institution engaged in longterm, policy-oriented research. This publication is part of the Institute's program to disseminate information to promote the use of research findings.

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Erratum

Jane C. Alcantara Lay-out and Design

In the rush and bustle of things, we sometimes give undue credit to places, events and things. Although we know that APEC is the single most important international event the country will experience this year, still, it is not right to imbue it with life, as we inadvertently did... Thus, in the last issue of the DRN, the second paragraph of the Editor’s Notes should read: The series of APEC articles featured in the last several DRN issues continues, this time featuring the APEC Study Centers which are holding their regional conference in Manila on May 9-10. The articles on pages 2 and 3 will serve as introductory information on the Centers for DRN readers.

-- Ed., DRN, March-April 1996 issue