I was invited to speak at the World Trade Organisation Public Forum, held last month at the WTO’s headquarters on the shore of Lake Geneva. (More on the questionable wisdom of locating a pro-free trade institution in highly protectionist Switzerland will follow…) In the opening plenary session we were addressed by WTO Director General, the Prime Minister of Lesotho and the Chairman of Unilever, but one man stole the show: Ted Turner, the billionaire media mogul turned philanthropist. He’s is a fascinating character. A straight-taking maverick good ol’ boy, once married to Jane Fonda, he sports a pencil-thin white moustache and looks as though he’s most at ease on the saddle of his favourite old Paint, roaming the half million acre Vermejo Park Ranch in New Mexico. Ted owns more land in the US than any other citizen. Ted’s pitch, as simple as it was unexpected, is that energy crops offer a double-barrelled fix to two of the most pressing challenges that beset the global community: the stalemate in the WTO’s ‘Doha Round’ of trade liberalisation talks and (more importantly) our dependency on fossil fuels that cause global warming.
At the WTO, the problem is this: farmers in the America and Europe fear they can’t compete without large government handouts or tariffs that keep out imports. Farmers in the Global South, on the other hand, want the chance to export to Europe and compete with their American counterparts on a level playing-field. From a farmer’s perspective it’s a zero sum game. But not in the world according to Ted. If the world begins meeting its energy needs through carbon-neutral energy crops, there will be new markets for all the world’s: whether it’s ethanol (from sugar or corn), biodiesel (from soyabeans and oilseeds) or biomass (from straw, hemp or coppice).
In short, the world’s farmers are currently deadlocked over who gets to feed the world with food. In Ted’s world, with energy crops as a new market for farmers, there’s enough demand for everyone to turn a profit. All that’s needed is some ‘pump-priming’ government investment into energy crop research and processing technologies, and the future’s looking rosy for farmers and good for the rest of us as we reduce carbon emissions. So where does the WTO come into this? Well, Ted didn’t put it directly, but what he and his United Nations Foundation staff seemed to be suggesting was that farm subsidies for energy crops be exempted from WTO disciplines that apply to food crops.
When something looks too good to be true, it usually is. So what are the drawbacks? The first question that should be asked is, if this is such a great idea why isn’t it already happening. If there is an unmet demand and a supply ready-and-waiting, why does government have to get involved? In part, the answer is that it is already happening, but perhaps not fast enough for Ted. Brazil meets a considerable portion of its domestic energy needs from ethanol derived from sugar cane. Brazil would like to sell ethanol to the US and Europe, but punitive tariffs keep Brazilian ethanol out. In the US, Midwestern farmers are rapidly abandoning unprofitable crops like wheat and oats in favour of corn for processing into ethanol. There are already generous federal subsidies to make it worthwhile.
Corn-based-ethanol is the toast of Washington DC. At cocktail hour at the White House, teetotal President George W. Bush is reputed to ply guests with his own recipe corn-based-ethanol caipirinhas. In the heady atmosphere that ensues, it has escaped the Administration’s notice that corn is remarkably inefficient as an energy crop. Corn is expensive to process into ethanol and requires a lot of water and heavy doses of agro-chemicals to grow. In terms of cost, corn-based-ethanol is no match for sugar-derived ethanol from Brazil or biodiesel from tropical plants. It is only a commercially viable proposition in a rigged US market where tariffs keep low-cost imports out. What’s more, grown as a intensive, subsidy-driven monocrop, corn can be disastrous for the local environment, and is reputed to be the cause of the poisonous dead zone that appears each year in the Gulf of Mexico. The US binge on corn-based-ethanol is likely to have an unpleasant hangover. Meanwhile, for developing countries that face rapid population growth and the possibility of food shortages, cultivating energy crops for export may be at the expense of much-needed domestic food production and in the case of tropical countries like Indonesia and Malaysia, ever-dwindling rainforests are being cleared for palm oil plantations.
So-called ’second generation’ biofuels may offer better prospects, though many are still in the research stage and not ready for commercial cultivation. Accelerating this research could well be good use of public (and private philanthropic) money, subsidising inefficient corn and sugar beet is not. The economic argument is made with clarity by Mike O’Hare, a former professor of mine at UC Berkeley: making biofuels cheaper to consumers does not, of itself, encourage us to make better use of the world’s finite energy resources; nor does it necessarily cause a switch away from fossil fuels. Cheaper energy only encourages us to be more wasteful. Driving to your pilates class in a 5-litre SUV that’s part-fuelled by ethanol is not helping to save the planet. A Chevrolet Tahoe SUV running on a 15 per cent ethanol mix receives an estimated $983 in annual subsidy from the US taxpayer.
But Ted a man of (tele)vision not details. And for all the flaws of his plan, it’s really refreshing to see him apply his folksy charm and infectious optimism at the WTO: so often such a depressingly staid and unimaginative place. I’m glad that a man like Ted is devoting his money and his time to supporting the multilateral institutions like the WTO and the UN, institutions that, whatever their shortcomings, are our only way to met challenges that are global in scale. I am still to be convinced that biofuels are a ‘green bullet’ – either for climate change or the Doha Round – but I’d be the first to praise Ted for encouraging us to – as the bumper sticker puts it - question the dominant paradigm.
Listen to Ted’s stirring speech for yourself: