Trade and geopolitics
How the war in Ukraine is changing the way nations tackle food security
Published 06 September 2022
Among the largest challenges posed by Russia's invasion of Ukraine is the alarming threat to food security. How are governments and agricultural companies responding? What are the dangers of food protectionism? Are trade agreements effective in facilitating compliance and cooperation? Research Fellow Alex Capri spoke with the Association of Foreign Press Correspondents.
Ideas about global security have been largely upended since Russia’s President Vladimir Putin launched a full-scale invasion of Ukraine, kicking off the largest humanitarian crisis Europe has seen in decades. Among the largest challenges posed by the war is the alarming threat to food security, which has only exposed further cracks in the global trading system.
Before Russia’s invasion, many countries around the world had already started to decouple from the current economic system and shore up domestic supply chains. In coming years, will countries continue to decouple, particularly to ensure food security?
Alex Capri, a research fellow at the Hinrich Foundation and a lecturer in the Business School at the National University of Singapore, believes in continued decoupling. Reflecting on more than two decades of expertise in global value chains, business, and international trade, Capri writes in his new paper, “After Ukraine: The New Geopolitics of Food Security,” that "a nation’s best hope for food security lies in successfully leveraging scientific innovation and technology."
In the report, he examines the critical role of Russia and Ukraine within global food supply chains and the impact of the war on food production. Along the way, he outlines key areas of food security technology and the evolution of agricultural companies into technology firms.
The global trade network has become increasingly fragmented even before the war in Ukraine. You explained that this has been, "driven primarily by systemic incompatibilities with China’s economic model." At its heart, is this a clash between market and non-market economies?
It’s an asymmetry between a neo-mercantilist model in China and a much more laissez faire open model, although not anymore because that's changing. Fundamentally, that was not sustainable. It was sustainable as long as China was a smaller economy and did not have the scale and heft that it does. Now its geopolitical objectives are much more ambitious. We have reached a point now where asymmetries and systemic incompatibilities are front and center. That would be China's state-centric or statist model, which is a very aggressive mercantilist model.
There is also a very pernicious element that was in existence even at the height of hyper globalization and at the height of trade and offshoring and investment into China. This is the Communist Party’s longer-term objectives in terms of exerting their will in a way that would project Chinese power and essentially use the international system as a catapult, and the international rule frameworks as an enabler or facilitator of their state-centric, mercantilist model.
You write that "a nation’s best hope for food security lies in successfully leveraging scientific innovation and technology." How are scientists responding to the challenges posed by climate change?
This assumes that they're also looking after themselves through geopolitical alignment and friend-shoring. But the scientific side will become increasingly important in terms of being able to localize food production and reduce risks in long and extended food supply chains.
To be able to do that, you need technology, whether it’s for vertical agriculture, the processing of non-animal proteins, and turning non-animal proteins into food. You also need technology that can deal with water scarcity issues and seed resilience for crops that can face much harsher environmental conditions. Drought-resistant, heat-resistant – these things become important.
Circular economies will become increasingly important, such as extracting and producing new kinds of proteins from insects. There will be a lot of innovative applications of science and technology that will essentially mitigate food security risk. A lot of it will facilitate the localized production of food.
What are the five key areas of food security technology? How are they being utilized to respond to the challenges of food security?
First, it is important to point out that some elements, such as the technological nexus for food security, are going to remain in the realm of large multinational companies and economies of scale.
But as we see a convergence of geopolitics, climate change, and the spill-over from the pandemic from a supply chain perspective, we will see more localized application of both technology and agriculture. The first concerns agrochemical developments and they are controversial. It involves a lot of genetic modification, the hybridization of seeds, and being able to take a corn seed or an apple seed or a rice seed and come up with 30 or 40 or 100 derivations, based on the ability to withstand different kinds of diseases and conditions.
That is an extremely expensive high barrier if you're going to be producing on a large scale. You're going to get some interesting alignments and hybrids. For example, a retail restaurant will become more of an agritech company. If you are going to produce 30 varieties of tomatoes with subtle flavors, you are going to cross breed a plum and a tomato. You have the technology to do that. Highly specialized food retailers will produce unreal derivations of fruit and vegetables. They might be able to do it on a localized basis, or they might do it on an economies of scale basis too.
In general, you need technology to bring everything together. You need metadata and AI and cognitive ability that goes into running any kind of a sophisticated enterprise.
On the flip side, we will see more people saying, "Let's go back to traditional, small-scale agriculture, the way people did five hundred years ago." There's going to be divergence. Singapore is a great example. I saw little restaurants here growing edible plants right there on the spot. It's becoming a badge of honor to say, "We are tech savvy and growing our own vegetables right here in the shop under special lights."
On the other hand, when you apply agritech on an industrial scale, a mono crop scale, it is scary. When you start getting away from high degrees of biodiversity and have these massive mono crops, they can be wiped out by one disease.
All of this requires technology and AI and semiconductors that are probably going to be dual use goods, and therefore subject to much broader export controls and sanctions. There is no way to escape the geopolitical issues. A dual use technology will inevitably be granted or not granted to certain buyers; it will be blocked for sale. Dual use technologies will also affect agritech and food security just as they will affect cleantech and the electric vehicle market.
You mention that "increasingly, the world’s leading agricultural companies look more like technology firms." Is this shift directly in response to climate change or are there other factors?
Food security is a national security issue and an economic security issue. It is an all-encompassing issue. You can't separate them. Technology is going to be required to be able to feed your population. You're going to have to leverage it in those areas that we talked about. If you can't do that, you're not going to have enough water to drink. Look at what's happening in the southwest of the United States right now. If things continue as they are, ten years from now, there won't be any water left in Lake Mead. We'll be down to all the toxic sludge sitting at the very bottom of the lake.
Now is the time for revolutionary changes. That means figuring out ways to be more efficient with water use. It is going to require large-scale innovations and desalinization plants, and more circular economies when it comes to water usage. That requires the right infrastructure, technology, and ecosystem of companies. This innovation either keeps the country stable and relatively at peace with itself, or the opposite. Otherwise, you have an unstable society and extreme issues of water deprivation. You can't have national security and economic security if you can't deal with these issues.
This will absolutely impact quality of life, and people really aren't ready for the large-scale changes that need to be made.
There's a trading opportunity. Whoever learns how to build desalination plants and the technology and infrastructure to extract water efficiently will be able to build that technology. From a trading perspective, whoever can produce and sell the right technology will emerge as market leaders. However, it’s unlikely in this geopolitical climate that China would be allowed to build a desalination plant in California. As such, agritech and water scarcity-tech will conform to the same type of friend-shoring trend that we’re seeing in semiconductors, rare earths, pharma and so on. This phenomenon will be accelerated by climate change.
Can you describe the connection between food security and corporate espionage? For instance, how have we been pulled into a "Cold War like grey zone"?
If technology is part of an important feedback loop linked to a nation's economic and national security, from a food security perspective, it's a bit like an arms race. Who's got the best technology? If you have the best technology that can enhance your economic and national security prowess, your adversaries are going to want to keep up. They're going to want to have the same capabilities.
This goes back to the first question you asked: why have things come apart? Why has the system been upended? Because to achieve their broader economic and geopolitical agenda, China in particular has embarked on a very aggressive campaign to acquire and absorb new technology around food security.
Does food protectionism leave domestic consumers worse off? Would this not lead to unrest in nations?
Food protectionism essentially limits supply even more, because you have governments hoarding it, or trying to prevent it from leaving the country, or assessing taxes on it. When they do that, it's a death spiral. The initial motivation is a reaction to scarcity and supply chain disruptions, which leads to even more inflated prices. As more countries adopt food protectionist practices, it creates even more food scarcity and disruption to the supply chain and higher prices and more inflation. It’s a negative death spiral. But it’s also a catalyst to produce food locally, or least friend-shore supply chains.
Multiple nations have created larger and mini-lateral supply chain arrangements in response to security issues. Are these arrangements effective?
These are early days. A bilateral, or an arrangement between three or four countries is much easier to negotiate and put into place than a huge multilateral arrangement. These deals take years to negotiate. Necessity is the mother of invention. If you need to ensure that you have to ring fence and quickly protect strategic critical supply chains, you're going to turn to your most trusted, most reliable partners. You're going to protect yourself by not becoming overly reliant on strangers or people who have different interests, geopolitical or economic.
It does make more sense to do that. More and more countries are turning to bilateral and specialized agreements, whether it's around food or the digital economy. We'll see more of that. It’s difficult to ask 164 members at the World Trade Organization to agree on anything. Particularly when you have the G7 and a few other countries that are at odds with China and its client states. You have the North South divide, which is consistently making it difficult to agree on anything.
Agreements like the Regional Comprehensive Economic Partnership (RCEP) and even the CPTPP are wonderful, but how do you enforce those standards? Look more closely and there are loopholes - it doesn't apply to this country and that country because they're less developed. By the time you parse everything, it's very difficult to enforce standards or exact punitive measures if people aren't playing by the rules. That's not the case with bilateral deals and sector specific or niche specific agreements.
This article was originally published by ForeignPress.org.
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