What are the consequences of farming abroad?

*As with any writing that pertains to trade and agricultural issues, I would like to note explicitly that this post represents solely my own opinions.*

A couple weeks ago, there was a fascinating story about the South Korean corporation Daewoo leasing land in Madagascar for the purpose of farming. This is especially notable because it is the latest in a series of land deals, whereby rich countries with limited agricultural production capacity are acquiring land in the developing world for the purpose of growing food to ship back home. A number of Middle Eastern countries have made similar arrangements in Africa, particularly Sudan, and China has been actively pursuing land deals in Brazil.

The scope of this deal is particularly staggering: if it is finalized, Daewoo would acquire a 99-year lease on 1.3 million hectares (half the size of Belgium) for no money, but Madagascar would presumably benefit from increased employment and rural development. I suspect the potential gains are highly skewed toward Daewoo, though I don’t want to fault a sovereign government for negotiating a deal presumably in its best interests.

However, I’m interested in the larger implications of this ‘farming abroad’ trend. In my mind, it’s inherently a sensitive issue because it involves food, which we all consume. Necessarily, agricultural investment will be more controversial and visible than, say, a sovereign wealth fund acquiring a stake in a foreign bank. The countries that are seeking these deals need to be very careful to avoid looking like imperialists, and there certainly needs to be a careful balance between how much food is exported and how well the domestic market is served. I wouldn’t bet on these contracts being honored very long if there were food shortages in the host country. How does any government allow food to be exported if locals are starving without full-throated international condemnation and vicious domestic civil unrest? My point is, land lease contracts ought to be managed with the utmost care to balance public relations and, more importantly, ethical concerns. A contract that looks skewed toward the foreign party is in neither side’s interests, in my mind.

Second, the lesson which these countries appear to have gleaned from the food crisis earlier this year is that self-sufficiency is the best option. If we follow this thinking to its logical conclusion, we risk severe resource-driven competition and conflict, especially as the world population continues to expand. For humanity to secure its food future, we absolutely need free and non-distorted agricultural trade at the multilateral level. That countries are drawing the opposite conclusion and adopting what I would describe as “beggar-thy-neighbor” food policies is troubling, to say the least.

(Photo from Quack A Duck's photostream)