SEN. BIDEN: The hearing will come to order.
Today the Committee on Foreign Relations will examine a topic that is making headlines around the world, the global food crisis. The famous Nobel laureate, the father of the Green Revolution, had a great quote, I thought, some time ago. He said, "Without food, man can live" -- excuse me -- "Without food, man can live at most but a few weeks. Without it, all other components of social justice are meaningless."
Today we meet here with millions of men and women around the world, and children as well, facing the fact of hunger and starvation. The price of indispensable staples -- wheat, rice and maize -- has doubled in the last three years. People are worried. They're angry. And some are even rioting.
From Haiti to Egypt to Bangladesh, riots have broken out as people demand the right for affordable food. For millions of people in the world who live on less than a dollar a day, higher food prices are the difference between a full stomach and hunger. For many, it's the difference between life and death.
The efforts of the -- excuse me -- the effects of the global food crisis are also felt here in the United States of America. At home, the price of eggs has jumped 35 percent. It was interesting, if I can be anecdotal for a moment, my mother is 91 years old and lives with me, and I take her shopping at the local supermarket. And I got such an earful from my mother last time around, Dick; her pointing out at 91 she doesn't ever remember prices rising so quickly. And I kept telling her, "Mom, it's okay, you will not starve."
But all kidding aside, it's amazing the impact that food, even in the United States, is having on retired people, people of modest income, and without any help. A gallon of milk costs 23 percent more. Even Sam's Club and Cosco are limiting the amount of rice consumers can purchase at any one moment.
This crisis has caught policymakers unprepared. For 20 years, foreign assistance funding for agriculture development has been declining. This is not a criticism of the Bush administration. It was declining during the Clinton administration and the former Bush administration. Necessary investments, in my view, have not been made. Donor nations lack a coherent food security strategy, and our response has been, I think, somewhat belated and disjointed.
The typhoon that devastated Burma, the earthquake that hit China, these natural disasters bring their own challenges. But the food crisis, which has been called the silent tsunami, didn't come without warning. Many of the factors have been obvious for years. This crisis is, to state what everybody and all our witnesses, I'm sure, agree, is unacceptable morally and it's unsustainable politically and economically.
Along with Senator Lugar, I recently convened a series of hearings on smart power to examine whether we have the right institutions and non-military instruments to deal with the new threats and challenges. The global food crisis is just such a new challenge.
Our response exposes our weaknesses, but it also points the way to needed reforms. Experts, many of whom we have here today, experts cite many factors for today's high food prices. Few seem to be new. Without proper planning, foresight and coordination, this crisis might have been managed -- with proper foresight. But we've not changed course as the price of food has nearly doubled in the last three years. Only now, with widespread hunger and civil unrest, has the drumbeat of concern reached high enough pitch to awaken us to take action.
As all of the world's religions tell us, we have a moral obligation to feed the hungry. We once had a vision to do that. It was called the Green Revolution. It transformed agricultural practices in countries from Mexico to India and allowed food production to keep pace with population growth, and it saved a generation from famine and starvation. It was a model of what vision, planning and resources can do.
But since then, our global food policy has lacked vision, lacked planning, and, I believe, lacked resources. Without a concerted action from our government and the international community, I think we're in danger of erasing recent progress to eradicate hunger and poverty.
The World Bank estimates that potentially 100 million new people can slip back into extreme poverty because of high food prices. Today I'm asking and I'm inquiring of the witnesses for a new approach to food policy and the global food crisis.
I believe it's imperative that we rededicate resources and attention in four areas, the details of which I'm anxious to have fleshed out for us by many of our witnesses. First, in my view, we need to reinvest in agricultural development. Some have called for a new deal for global food policy. I support those calls. What the world needs is a second Green Revolution. That means funding for innovation, research and new techniques.
Second, it seems to me, we need to make sure our institutions are organized effectively to address the food challenge. A report from the Government Accounting Office, to be released later this month, concludes that the U.S. and other donors have not made food security -- that is, cutting hunger in half by 2015 -- a top priority.
This report also shows that we lack an integrated strategy for dealing with agricultural development and food policy. Various U.S. agencies are pursuing isolated agricultural strategies that don't seem to share a common vision. Reform needs to happen quickly and immediately, the details of which again are important, and hopefully we'll discuss them as well.
Third, we should ask the hard questions about existing food policy. Does our current biofuel policy, which I have supported, divert too much corn from food to fuel? Does it make sense? How much is it diverting? What are the consequences of it? I hear estimates everywhere from 3 to 30 percent. And I'm anxious to hear what the witnesses have to say.
Should we provide more flexibility to our food aid program and allow USAID to locally purchase, as the administration has suggested, locally purchase food abroad to feed the hungry people instead of requiring them to buy American and all the transportation costs associated with transporting that food?
And finally, the international community should consider a global compact on food that will eliminate crippling food tariffs afflicting the poorest countries. For those countries, trade is not a matter of competition. It's simply a matter of fairness.
Both panels today are well-placed to help us with the inquiry and to address these three critical questions: Why is there a food crisis? Could we have avoided the crisis? And how do we need to respond in the immediate and in the future to this crisis?
Administrator Henrietta Fore and the chairman of the Council of Economic Advisers is here today with a very distinguished panel, and they're going to start the hearing. They are at the forefront of U.S. government efforts to respond to the food crisis.
I understand, Administrator, you're just back from Burma and facing the aftermath of that typhoon.
In our second panel, we'll be joined by Executive Director Sheeran of the U.N. World Food Program and Dr. Peter McPherson, former administrator of USAID and president emeritus of Michigan State University, and James Lyons, vice president of communications and policy at Oxfam.
And I would close with the following quote that my staff found for me from President Kennedy. He said, "Never before has man had such a capacity to control his own environment, to end thirst and hunger, to conquer poverty and disease, to banish illiteracy and massive human misery. We have the power to make this the best generation of mankind in the history of the world or to make it the last."
That was more than a generation ago. It seems to me it still holds today. So I look forward to hearing the testimony this morning, and I will yield to Senator Lugar, who has a genuine expertise in this area after years of having been chairman of not only this committee but the Agriculture Committee and a senior member of that committee as well.
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SEN. BIDEN: Thank you very much, Mr. Chairman.
We'll do seven-minutes rounds, if that's all right with my colleagues.
Mr. Chairman, let me start by asking you to what degree is the food crisis due to the high price of oil and declining dollar? Do you factor that at all?
MR. LAZEAR: We do, yes.
These estimates, obviously, are estimates. And we try to do our best to incorporate a variety of factors. The rising energy prices are significant, obviously, because they affect the cost of producing agricultural costs. We estimate that high-energy prices can account for as much as 20 percent of the increase in food prices.
You mentioned the dollar. The dollar affects food prices in the United States, but does not affect food prices, for example, in Europe and other countries where you don't have the same kind of effect and in some cases it goes in the opposite direction. But if we looked at the United States, we estimated that the depreciation of the dollar can account for as much as 13 percent of the rise.
SEN. BIDEN: And what about the role of commodity markets? Are they -- investors betting on scarcity or, I mean, what's going on there?
MR. LAZEAR: Investors can certainly have an effect on prices -- particularly prices over time. So futures market prices, relative to spot market prices.
It's unlikely that investors in speculation is having a significant effect on the current high price of food. And primarily, the evidence on that is that if you look at inventories, inventories for most goods are down -- as opposed to up.
The logic is this: If investors were in there speculating trying to buy up goods right now, they would be doing so in hopes that future prices would be even higher, so they could buy low and sell high. If that were the case, what you'd expect to see is that inventories would rise. That doesn't negate the possibility that investors are in those markets, but it does suggest that they're not playing a major role -- at least at this point -- in effecting the spot prices that we see.
SEN. BIDEN: Ms. Fore, talk to me a minute if you would. Take me back. There's been a constant decline on our part in the proportion of U.S. development assistance to agricultural programs. The last 20 years -- that decline -- it was as high as 20 percent. Now it's about 3 percent.
Obviously, you've looked at this. What is the reason for that? And again, this spans administrations. It's not a Republic or a Democratic policy. It spanned administrations. What is -- to what degree is it responsible for -- responsible may be too harsh a phrase -- to what degree has it contributed? Or put it another way, if we had maintained this investment at a 20 percent rate in these developing countries, is it likely the circumstance would be different and what caused us to change our attitudes and should we begin to shift back to a significantly larger investment in developmental assistance in agriculture?
MS. FORE: I think it's a very good question and I think it's very important for us as a nation to address it.
I think that investing now would be enormously positive for the world at large. The world at large has under invested in the last few years in agriculture -- in all aspects of agriculture. And it is a time when we now can step up and reinvest in agriculture and refocus on it, because there are humanitarian, there are production issues -- such as Senator Lugar mentioned -- and there are policy reforms. And on all three fronts, the world can really make a large step forward in how we approach agriculture.
When you compare productivity in the United States or in the developing world, the farmer per-acre yields, the African farmer has not had the same capacity, and as a result, food production is not as high per acre. The productivity is not as high. So it's an enormous opportunity for the world to step forward and try to bring short-term, medium-term and long-term solutions to this problem.
SEN. BIDEN: What I'm trying to get at, if I could articulate my question better than I did, Senator Lugar and I share a similar view about what is a -- even if the, Mr. Chairman, your assessment of the impact of focusing on biofuels was larger -- your estimate is total of, worldwide, 3 percent of the cost of the 43 percent of the rise relates to it.
But let's assume it was higher, and some argue it is. There are very important tradeoffs. I mean, we're being asked to make choices about energy and -- not independence, but not such overwhelming dependence on -- you know, tomorrow morning Chavez may wake up and decide he's just not going to ship any oil this way. I'm being a bit exaggerated.
So these are two competing, legitimate, substantial concerns. But it turns out -- I happen to be of your view, based on my research that my staff has uncovered for me -- that it is not a major factor. It's not the primary factor in the increase.
Going back, if I can use that as a comparative note here, when you look at development, we decline -- the aid decline; developmental aid for agriculture declined from roughly 20 percent of the AID budget to roughly 3 percent. Is that because of sort of benign neglect, it was off the radar, or is it because we made other hard choices?
Is the aid that's available to us now -- did we shift? Is the consequence of the shift a consequence of changing priorities or competing interests that two administrations in a row or three administrations in a row thought would warrant this decrease? Or did it just happen and no one was keeping their eye on the ball? That's the point I'm trying to get at here.
So I call for rededicating ourselves to significantly increasing the money for investment in agriculture -- us, the United States -- while promoting the rest of the world to do the same. But we can control our agenda. Are we going to run into arguments saying, "Well, wait, when you do that, even if you increase the absolute number of dollars available, you're going to be crowding out other very important things that have developed over the last 20 years that we need to be doing"?
Talk to me about that. My time is up, but just talk to me about that.
MS. FORE: Development assistance, as you know, is always a combination of factors. And the areas that we feel are moving along fairly well in the world tend to get less attention in funding streams, and we move to the areas that seem to be most urgent.
But since we look around the world and we are trying to attack the root causes of poverty, there are many aspects to it. So funds, for many good reasons, have gone to other programs. And agriculture and food security was seen to be relatively stable.
But productivity rates have dropped. The growth of population in the world has increased. And a number of factors have come into play. And over the years, we have just not invested as much as we could have. And as a result, we find ourselves now with budgets that are imbalanced in terms of agriculture.
So it is a good time for us as a country to take our leadership position in which we are a major factor in the world -- and we have enormous potential on private-sector as well as public funds -- and use this time to reinvest smartly, because we know we need to stretch the taxpayer's dollar in areas that will be most effective.
SEN. BIDEN: I thank you very much. My time is up. I'm sure one of my colleagues will raise the other two areas of great concern to me, and that is the emerging markets, 18 percent accounted for, your estimate, but they're going to continue to emerge. What are the projections?
And also purchasing local food, because transportation costs have gone up, I'm told, I think, around 53 percent, something to that effect. Or it takes up, what is it, 53 percent of every dollar in food aid is a transportation cost. Don't hold me to that number. I should know it exactly. But I hope we talk about that before the panel leaves.
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SEN. BIDEN: Hang around, the menu is open.
Thank you, Senator. And I apologize for thinking your yielding was yielding. But thank you very much.
Let me say before -- do you have any further questions -- before I dismiss the panel -- and thank you both for giving us so much time -- one of the frustrating things that Senator Lugar and I and Senator Cardin and others who care, as most of us do, deeply about issues like this and PEPFAR, the global AIDS fund and Darfur and all these human catastrophes that are around the world that we have the capacity to do something about is that it's hard to get them up on the agenda in a way that we're able to overcome objections of just a very few people.
I was very proud of the work that Senator Lugar's staff and mine did in working with the administration on something they should be complimented on on PEPFAR on dealing with the, you know, global AIDS funding. And we increased it significantly and made some real changes, real compromises and it was ready to roll, and a few senators on the floor are stopping us moving on it.
And one of the purposes -- I remember Chairman Fulbright, when I first served on this committee, telling me he thought the most useful purpose of this committee was as an educational tool. It's a means by which to inform our colleagues. We don't have that much legislative authority. It's not like when I was chairman of the Judiciary Committee or chairman of the Agricultural Committee. There's more you can actually legislate. You don't legislate foreign policy.
And one of the things I want to raise with you because we'd like very much, Secretary, to work with you is that I really do think the point made by the chairman is that one of the great contributions you can make and the administration can make to the next president, whether it's John McCain or Barack Obama or Hillary Clinton, whomever, is to bequeath them a beginning of a reorganized effort here that's consequential, coordinating, so they don't start from scratch because the truth of the matter is there's some big-ticket items here.
And one of the pieces of it, and this is reason, for me, for some degree of optimism, is that there are scores of significant people in the United States who neither run NGOs nor are government officials but who are very, very bright and wealthy individuals who are willing to make significant financial and personal sacrifices, as we've seen in the fight against AIDS and, I would argue, here in this area. And this is anecdotal, but I think it's reason Americans should be optimistic.
I was talking to a friend of mine, who is a very successful investment banker, who called me the other day -- and I hope he won't be embarrassed; his name is Terry Meehan, in New York -- and he said, look, Joe, I'd like to come and see you. And he said, because I'd like to devote the next three or four years of my productive life here in doing something about the food crisis. I want to be involved. I want to get deeply involved with my resources as well as whatever skill I can bring to bear.
And so I just would hope that as you're thinking about it and the administration is thinking about it and we're thinking about it and the witnesses we're about to hear is that there's got to be an even better way to sort of coordinate. And I'm not suggesting that the Terry Meehans of the world are the solution to the problem. I don't mean to suggest that. But a better way to coordinate from the United States to totality of our resources, human as well as financial, to deal with what everyone has acknowledged and you both pointed out is a problem that is emerging. It's difficult now, it's going to get bigger, but it's not without solution, it's not without answers. So I just raise that with you.
And I would ask, Madame Secretary, whether you'd be willing to, over the next, you know, months just to be able to work a little bit with our staffs to see if we can either follow on, build on what you're already proposing or follow on with maybe some ideas about how we, you know, just change the dynamic here. And I know your forte is management. It is something that I think we desperately need, and we'd like to work with you.
MS. FORE: Thank you, Mr. Chairman. I would welcome that. I think it is a time when we really would have a chance to do something significant and multi year and public and private, including foundations in other countries.
SEN. BIDEN: And as I said earlier, I cannot speak for any of the candidates, although we all three know all of them well because they're colleagues. But I believe I know that Senator Obama and I know that Senator Clinton and I believe that Senator McCain would be very, very interested in, you know, beginning to reshape the organizational chart here so that they're in a position to be able to hit the ground running. And again, that is not a criticism of the administration. I'm not trying to suggest anything other than we all acknowledge we need a new model here.
So I thank you very much. Thank you both for being here.
MS. FORE: Thank you, Mr. Chairman.
MR. LAZEAR: Thank you.