LAUSANNE, Switzerland – While trade fosters prosperity and peace, trade barriers heighten the risk of economic weakness and major political and social upheaval, said David W. MacLennan, CEO of Cargill.
Speaking March 28 at the Financial Times Global Commodities Summit, MacLennan advocated against “me-first” trade stances. The summit was held at the Beau Rivage Palace in Lausanne.
“Severe economic conditions – combined with other social and political factors – can also push governments to the edge and, in worst cases, spark civil unrest,” MacLennan warned. “Poverty and conflict all too often force people to leave countries they love in search of a better life for themselves and their children.”
Such a dire picture of the potential consequences of aggressively protectionist trade actions is anything but hypothetical, MacLennan said. He described a chain of events that resulted from a 2010 heat wave in Russia that reduced that country’s wheat production by a third. In response, Russia instituted a wheat ban that triggered a dramatic escalation in global wheat prices.
“A 2 percent change in global wheat supply drove nearly a 60 percent increase in prices around the world,” MacLennan said. “At the time, Russia supplied Egypt with the majority of its wheat. The rapid shift in supply led to price increases, and when combined with broader political tensions, was one of the contributing factors to the 2011 protests in Tahrir Square.”
He said similar scenarios played out in 60 different nations around the world over the last decade, contributing to varying levels of social and political instability.
Noting that many nations recently have been “leaning further toward economic nationalism,” MacLennan described a domino effect of economic actions and retaliatory moves that threaten to leave world trade “tied in knots.”
Advocating for support of the World Trade Organization, and a rules-based trading system, MacLennan offered a dystopian view of what could transpire if the “me first” approach to trade continues to build.
“Imagine critical commodities – oil, food, metals and manufactured goods – used as bargaining chips at every turn,” he said. “Imagine a world where technology and ideas cannot cross borders. It’s a world none of us wants to see, but is foreshadowed by recent meetings of the G20.”
While warning of the threats posed by a global tilt toward protectionism, MacLennan devoted most of his presentation to offering a vigorous defense of world trade, describing what Cargill is doing to advocate for free trade and encouraging his audience to defend free trade.