HUMAN RIGHTS COUNCIL ADVISORY COMMITTEE DISCUSSES THE RIGHT TO FOOD

The Human Rights Council Advisory Committee this morning held an interactive dialogue with an Expert from the United Nations Conference on Trade and Development on how speculation on food prices was affecting the right to food before discussing organizational matters.

Heiner Flassbeck, Director of the Division on Globalization and Development Strategies of the United Nations Conference on Trade and Development, provided the Committee with an introduction to speculation and food prices. He said that there were clearly speculative forces behind the high prices. The speculation took place on the commodities market involving futures on commodities. Speculators were interpreting political decisions as indicators. For example, the fact that governments said that they would engage with bio-fuels apparently led some speculators to go into the food market. It was clear that the most efficient way to dampen this development was government intervention. Governments had to play a counter-speculative role.

In the interactive dialogue, an Expert wondered whether the speculation on basic foods could fall under the charge of usury under the Criminal Code. Also, futures exchanges on staple foods could be forbidden. The Advisory Committee could maybe suggest new norms. An Expert asked whether the volatility of the market had to do with the emerging economies of India and China. Mr. Flassbeck answered that such a rising demand would only cause slowly rising prices and not a price spike. An Expert further inquired on the position at the political level on this issue.

Speaking on the issue of the right to food were the following Experts of the Advisory Committee: Jean Ziegler, José Antonio Bengoa Cabello and Wolfgang Stefan Heinz. Representatives of the Indian Movement Tupaj Amaru and the Juridical Commission for the Autodevelopment of First Andean People also took the floor.

Also, this morning, Experts discussed the way they should report to the Council. Some Experts requested that the Bureau should draft guidelines on the format their answers and recommendations to the Human Rights Council should take.

Committee Expert Mona Zulficar noted during the discussion that they were three types of sub-items under item three of the agenda. Two of the sub-items, the right to food and human rights education and training, had drafting groups attached to it. They planned to come out with a written document at the end of their consultations, in the form of an action plan or a progress report. Another type of sub-items were the items on the missing persons and leprosy, where the Advisory Committee had no clear mandate yet and was awaiting to be charged by the Council with the matter after certain studies were sent to the Advisory Committee by the Council. For these sub-items, they had charged Mr. Sakamoto to do follow-up on the leprosy issue until the Council charged them with the matter. The last type of sub-items was the so-called “mainstreaming” issues, on gender, a democratic order and person with disabilities, where they had to make a general contribution to these topics in their work.

The President of the Committee Miguel Alfonso Martinez said that next week, the drafting groups should present their outcomes. These should be in the form of a brief paper, describing the groups' propositions for recommendations to the Council, in order to discuss them in plenary.

Committee Expert Purificacion Quisumbing proposed that the Advisory Committee should appoint volunteers to take up the sub-items that did not yet have someone assigned to.

The next meeting of the Advisory Committee will be at 10 a.m. on Monday, 11 August to discuss organizational matters.

Presentation

HEINER FLASSBECK, Director of the Division on Globalization and Development Strategies of the United Nations Conference on Trade and Development (UNCTAD), said he would speak about the role of speculation and food prices. Economic theory said that speculation had only a temporary influence on food prices, and this influence was a symmetric influence. The influence was the same to increase and decrease prices. What they had seen in the last months confirmed to a certain extent that theory. But it was rather obvious that after the sup-prime-bubble, many funds were directed to other markers, as the commodity markets.

Mr. Flassbeck said that there were clearly speculative forces behind the high prices. The turn-around, which could be seen in unrelated markets was the proof to that. There were a number of instruments in markets such as index funds. Those funds operated on a number of markets, also including oil and food. To hold such a future meant to hold a paper for three months. After that the paper would be resold.

The normal speculator would buy and resell after three months. Only physical traders were really interested in the goods and would buy the goods afterwards. Big buyers of wheat for example such as bakery chains went into the futures markets because they saw that the prices on the physical market went up. On the futures markets the higher prices were then passed on in higher prices which led to a spill-over-effect into the real prices. That meant that some commodity markets had additional money flowing in. If futures markets were driven up, a quick spill-over-effect into physical prices followed. This went on for longer than three months; we had seen it for 6 or 8 months. This was far too long for consumers and malnutrition would necessarily follow.

Mr. Flassbeck continued that if supply increased physically, the speculation would collapse. Also, if the world economy was going down, the prices would suddenly collapse too, because speculators went out of commodity markets. This was because people were interpreting political decisions as indicators. The fact that governments said that they would engage into bio-fuels apparently led some speculators to go into the food market. There were no means to fight this development. The volatility of commodity prices was one of the reasons for founding UNCTAD. By now it was clear that the most efficient way to dampen this development was government intervention. Governments had to play a counter-speculative role.

From a legal point of view, some businesses could simply be forbidden, such as speculation on food. Mr. Flassbeck did not see any good reason that such a speculation was needed from an economic point of view, that it would stabilize the prices. This speculation was clearly destabilizing for producers and consumers. Producers could not rely on the high prices.

Subsidies, as those from the European Union, also led to higher prizes, but gave incentives for producers to invest more. But this kind of volatility that they had seen would not produce something like that. Governments all over the place should do everything to help people who could not afford those high prizes. It was as important on the demand side as it was on the supply side to have steady prices. Prices must be higher in the future than they were in the past, but it was vital to get more stability. Adjustments as the substitution of certain kinds of food or saving energy would take time and therefore price stability was needed.

Jean Ziegler, Advisory Committee Expert, said that he had found that the presentation was vitally important for the Advisory Committee's work towards protecting the right to food. In April 1964, Che Guevera had addressed the United Nations Conference on Trade and Development in Geneva during which the obligation for Governments to create food reserves that would then be used to prevent speculation on the market had been a subject. He wondered if these methods were still viable today. Could the outcomes of this conference be used nowadays?

There was also a second method, one should use the law, said Mr. Ziegler. In criminal codes, there were articles saying that usury was a crime. Could the speculation on basic foods fall under the charge of usury? A third proposition was the prohibition of futures exchanges on staple foods. The Advisory Committee could maybe suggest new norms.

Further, one must not have any kind of illusions about the adversary, underscored Mr. Ziegler. The adversary was very powerful. A month ago, the United Bank of Switzerland had launched a publicity campaign that suggested that investors could make up to 25 percent return when investing in such markets. When one talked about speculators, it was no more only the hedge funds, but nowadays, the biggest banks in the world had also a role in it. The United Bank of Switzerland was the biggest Swiss bank and the second largest bank in the world. It was the banking world that was involved in the speculation of staple food and was playing with the lives of the poorest.

Mr. FLASSBECK, answering the questions, said that this kind of speculation as seen nowadays had not been expected by anybody. The speculation was systematically misguiding the way of the futures market in a totally unrealistic way. Speculation was not stabilising overheating markets but was further destabilising them. Normal functioning markets would look for information in order to stabilize themselves, but nowadays banks were playing like hedge funds.

Further, the players were more and more interconnected in the communication age; they each had information about others' actions in real time and in a rapid manner. As the world was getting more globalized, the more powerful were the moves when going into one direction. The actual situation could hit any existing market. Playing with currencies could also happen and would affect the fate of a country even more. Big players were now fully engaged in these kinds of speculations; this was a new phenomenon. There was a need for Government measures to fight these practices.

Concerning the food reserves and UNCTAD's old policy, Mr. Flassbeck said that government intervention was still the most effective and direct means to avoid volatility. The more private players were engaged in the market, the more Government intervention was needed. Governments should also prohibit publicity saying that a 25 per cent return was possible. There was a huge risk to get such a high return and investors should be clearly informed about this. This would already block people from investing.

JosE Bengoa, Advisory Committee Expert, said that the Committee was mandated by the Council to provide guidelines, ideas and advice from the angle of human rights. Mr. Bengoa said that Mr. Flassbeck's perspective was absolutely fundamental.

He wanted to know if what Mr. Flassbeck had described had to do with the availability of stocks. As could often be read in the press, was the cause of the food crisis the emergence of new markets? Was it that because India and China were importing a huge amount of food, there was simply less food available? In that case, there was simply nothing to be done except increasing production.

Wolfgang Heinz, Advisory Committee Expert, asked whether the analysis could be expanded a bit more. What was the position at the political level on these issues? What was the position of governments and world trade organisations on the current situation? Did they say that action was needed and that someone had to do something about it? Or was there an unholy alliance saying that it was too complicated and dangerous and that one should let the economy develop by itself?

LAZARO PARY, of Indian Movement "Tupaj Amaru", said that it had to be recognized that the speculation was part of the new international order. Everyone said that globalization was an excellent opportunity and that it was a phenomenon as the weather. Particularly indigenous people were affected by famine and destruction. UNCTAD needed to address certain critical issues and how to deal with this disaster which threatened the very existence of humanity. The blind rule of the market was not enough. A more scientific and vigorous approach was needed.

He believed that a code of conduct and an international framework were needed. UNCTAD should try to draw up a code of conduct or rules that were obligatory.

TOMAS ALARCON, of Juridical Commission for Auto-Development of First Andean Peoples (CAPAJ), asked Mr. Heinz for his opinion on the United States' free trade agreements. Was this not also a platform for speculation?

Mr. FLASSBECK said that there were physical arguments to higher prizes. The increase of demand in China and India explained slow increases but not spikes like this. To help the poor meant to give them the instrument to invest and raise productivity. In Africa, the financial possibilities to invest were so bad that it was impossible for farmers to increase productivity.

Slow changes on a global scale were not to be feared and could be dealt with. It was the sudden increases that posed problems.

Political reactions, such as that of the US Congress that had held hearings concerning the food crisis, were impressive. As a result of those hearings, people would support Mr. Flassbeck's position. But the mainstream economic thinking was still that it was a transitional phenomenon. This did not mean anything if people were dying.

UNCTAD's ACCRA-Accord said that there was a need to rebalance the market and government roles. UNCTAD was still on that road. Nobody came up with a good argument against the fact that speculation was hurting prices. There were markets where prices were pushed in a wrong direction.

Mr. Flassbeck wanted to clarify that UNCTAD was not against the market mechanism itself. This was a distorted market mechanism and not a reasonable allocation of resources. More governments understood that they had to play a role that markets could be efficient.

Regarding free trade agreements as breeding ground for speculation, UNCTAD was fighting for governments to play an active role in development strategies. This was important in commodity-dependent-economies, they needed government intervention. He stressed that diversification could only be done by government intervention since this was not done by investors.

In press release AC/08/9 of 7 August, the statement by Advisory Committee Expert Latif Huseynov should read as follows:

LATIF HUSEYNOV, Advisory Committee Expert, commented that he had another theoretical interpretation on the obligations stemming from the Convention on the Rights of Persons with Disabilities. Concerning economic, social and cultural rights, the convention used the same expression as was used in Article 2 of the International Covenant on Economic, Social and Cultural Rights, the ‘progressive realisation' of the rights of people with disabilities. Certain States which had not yet ratified the convention faced difficulties complying with the obligations of the convention.


For use of the information media; not an official record


AC08010E