GIVEN the impacts of Covid-19 and the war in Ukraine which caused global shortages of goods and major transport delays with resulting price inflation (the price of flour in T&T jumped 28 to 33 percent), many countries are concerned about their food security.
In general, commentators recommend that the solution to food security in T&T is to grow what we eat and eat what we grow, becoming self-sufficient in food production, which involves a change in taste. Cuba, after the collapse of the Soviet Union, tries without much success to feed itself. Therefore, our government is encouraged to facilitate local food production and even households are encouraged to plant something. Another reason advanced for this approach for our small open economies in the region is that it will reduce the outflow of foreign exchange through this import substitution – the region imports some US$6 billion worth of food per year.
The question though, is it feasible and even economically efficient? For example, Singapore is said to be one of the highest ranked countries in the world for food security, but imports most of its food. It has one of the highest per capita GDPs in the world, a thriving export economy but limited land space. Therefore, its importers are required to stock imports and use various supply chains to ensure food supply in the event of transient market and supply chain disruptions. These may not have counteracted the impact of Covid-19 and the war in Ukraine, since these are major disruptions in food production and its delivery around the world, an abnormal situation , which has seriously affected food security in the world.
When considering food security, certain economic concepts must be taken into account; economies of scale, specialization, ability to trade internationally, diversity of import markets, fragility of supply chains and people’s ability to afford to buy food, even local produce.
Consequently, Caricom recently convened a conference held in Guyana where it was agreed that given the vast land areas in Guyana and Brazil, Caricom will use them in the regional production of corn, wheat, soybeans, meat and rice and later develop efficient food processing and transportation and distribution networks. The Brazilian state bordering Guyana could also be a regional supplier of these commodities. This approach immediately reduces the length and increases the reliability of food supply chains while utilizing multiple production capacities that have the required economies of scale.
Considering the limited resources available to the countries of the region and the aforementioned approach of Caricom; instead of everyone trying to grow their own food, according to the concepts of economies of scale and specialization, it would be more profitable for them to import food and diversify their economies to earn foreign exchange in areas in which they are globally competitive. So it comes down to the question of what should a country produce and in particular what should a small open economy like T&T produce for export?
One of the comments I’ve heard is to look around the world at what others are doing and exporting profitably and producing the same thing. This approach certainly does not yield the highest returns on the use of resources – financial, human and physical – since the products would have little or no competitive advantage in the market, unless their production is innovative. in the sense of disruptive innovation.
Another comment was to produce what we consume. This goes against the theory of specialization in which you produce what you are best and competitive at, so do forex and import what you are not so good at. This is the most efficient use of local resources. Yet another comment was that we take advantage of our comparative advantages, for example we have fine cocoa beans and hot peppers. Indeed, they would fetch better prices in the commodity markets but much more so if we were to use them as inputs in value-added and competitive products.
There are also recommendations that we should develop strategic plans for our industrial parks, Tamana, Phoenix and others, and invite foreign direct investment, as we saw recently in Phoenix Park – two Chinese companies will locate there . Indeed, the two countries, Singapore and Ireland, launched their economic development by inviting foreign direct investment. Ireland offered low tax rates and even business subsidies for R&D (and is a gateway to the EU). Singapore has always been a warehouse and encouraged manufacturing plants with local incentives. He even paid foreign personnel to train the locals. However, today both countries are innovation hubs (in the EU and in Asia) where local R&D institutions are provided, encouraging start-up SMEs to locate there and take advantage of this innovative support. .
So trying to attract foreign investment to our industrial parks is an approach that can create jobs and foreign currency if the right incentives are in place. Yet they will export profits with an increased disparity between GDP and GNP. So, to really grow our economy, it is necessary that we turn to local innovation to build and sustain indigenous export capacity and capability – moving from just hosting FDI to creating an innovation hub crucial for sustainable economic development.
If then our business model is going to be about specialization, international trade, exporting competitive goods/services and importing what we don’t produce so well, then we need to build a national innovation system, preferably our own variation of the Triple Helix, as already described at length in this space.
But to come back to food: two examples of the impact of R&D on its production are the Brazilian experience in becoming one of the largest exporters of food in the world with the use of EMBRAPA, its institution of R&D and the same role played by the University of Wageningen in the Netherlands in making this country the second largest exporter of food products in the world.
Yet food security in Brazil is limited not because of the unavailability of food, but by the poverty of certain segments of the population and their inability to buy adequate food. Therefore, food production, as Caricom has just accepted, will also depend on regional R&D facilities, otherwise with adequate foreign exchange countries will again import from outside the region.