Study Guide Group of 20

Authors: Viet Duc Nguyen Georg-August-Universität Göttingen Anne Reinhard Georg-August-Universität Göttingen Thomas Michaelis Georg-August-Universität Göttingen

THE GROUP OF 20

The Group of Twenty, also known as the G20, is a global forum, where Representatives of the twenty largest economies gather every year to promote financial and economic stability across the world. These major economies seek to affirm and discuss policies that aim to achieve sustainable growth across the globe. The forum has gained prominence and global recognition, especially as the G7 members realized the need for a more inclusive economic forum, among which would also be the rising economic powerhouses such as Brazil, India, Mexico, South Africa, Turkey and others. Even though the G20 does not have any formal authority to enforce its decisions or member’s pledges, the forum still presents an opportunity for members to influence global policy through discussion and cooperation with other members. The impact of the G20 summits should not be underestimated; numerous global issues have been solved within the framework of the Group of Twenty. The aims of the G20 go beyond simple policy recommendations, at every annual meeting, the leaders of the G20 nations attempt to find a common economic understanding and framework for dealing with a recent crisis or a threat to global economic growth. Each country present at the summit has to consider both national and global interests when finding a common solution. There may be a clash of interests, since countries might have ongoing rivalries or economic competition, however, these clashes of interests can, and have been resolved through diplomacy and cooperation at past summits. The agenda of the summit may change depending on circumstances, so the Group of Twenty may address a wide variety of different issues and global problems in each summit, ranging from climate change to underemployment. The group also addresses and tries to focus on social and environmental issues, since they are indirectly or directly related to economic life in one way or another.

Table of Contents

I. INTERNATIONAL TAX EVASION 1. Introduction to the Topic 2. The issue of International Tax Evasion 2.1 Basic Terminology 2.2 Methods of Tax Evasion 2.3 Consequences of Tax Evasion 2.4 Case Study 3. Major International Actions and Relevant Actors 4. Major Actors and Problems that arise 5. Questions a Resolution Must Adress 6. Useful Resources and Links

II. FOOD SECURITY 1. Introduction to the Topic 2. Definition 3. Who is affected by food insecurity? 4. Problems and Solutions 4.1 Biofuels 4.2 Food Production 4.3 Environmental Impact 4.4 Food Prices 4.5 Economic Impact 5. What the Group of 20 has done so far 6. Possible Solutions 7. Questions a Resolution Must Adress 8. Useful Resources and Links

I. INTERNATIONAL TAX EVASION

1. Introduction to the topic

In the modern economy the state has numerous responsibilities: the promotion of economic growth and development while achieving competitiveness on the international market, the successful allocation of the country’s resources in an efficient manner, the provision of basic goods and services to its citizens, such as security and education, and the maintenance of the necessary infrastructure. Naturally, all these responsibilities result in huge costs and require a lot of personnel. The most important tool for covering all these measures and issues is taxation.

Since the state operates on behalf of its citizens, it is only logical that each citizen has the obligation to contribute to the state, to ensure its efficiency. Therefore, each time citizens are taxed (i.e. are obliged to pay a certain amount of money to the state), they are actually helping themselves (at least theoretically), as the state can use this money to provide services to the citizens and improve its finances. Consequently, the usefulness of taxation is out of the question, as it forms a large part of a country’s economy and cannot be omitted.

However, things are never as easy as they sound. Tax law is a very complex aspect of a country’s legislation, as it usually is thousands of pages long, and unfortunately the enforcement of this law is even more complicated and challenging. Taxes themselves are a more or less fair principle, as everyone, including individuals and corporations, are obliged to pay their share to the country, i.e. a part of their annual income and consumption. Unfortunately, there are always people who choose to break or bend the law and ignore their basic obligations by refusing to pay taxes or by only paying parts of their taxes. The act of avoiding the payment of taxes is our topic: tax evasion.

In most cases tax evasion constitutes a willful infringement of a country’s legislation and is punishable by the respective law of each country. The problem is, that it is extremely difficult (if not impossible) to catch all tax evaders, since in today’s globalized world tax evaders have found many ways to cover their tracks and, as a result, many of them get away with their actions. It is obvious that this is unfair towards regular tax payers. Each sovereign state has a legitimate interest in closing tax loopholes and preventing tax evasion.

The purpose of this study guide is to analyze the various techniques used by tax evaders and to propose measures how it might be possible to combat tax evasion through national efforts and international cooperation.

2. The issue of International Tax Evasion

2.1. Basic Terminology

In recent political discussions concerning international taxation there seems to be confusion on many technical issues and terms. In the next part we will briefly explain and differentiate between the main concepts and terms.

Tax Evasion

Tax evasion is defined as any activity which is intended to reduce the individual tax burden. This might involve other illegal actions like theft, fraud, or forgery in relation to tax, or specific statutory offences of tax evasion, depending on the jurisdiction concerned. Tax evasion typically involves the misrepresentation of the facts to the revenue service by deliberate or reckless concealment or omission.

Tax Avoidance

Tax avoidance involves the arrangement of a taxpayer’s affairs in a way that allows the individual or corporation concerned to claim a reduced tax rate. Finding tax “loopholes” is an example, but corporate profit shifting activities also contribute to tax avoidance.

Tax Haven

The term is used to describe jurisdictions with low or non-existent rates of tax. Most examples of Tax havens are countries, which have few or no natural resources and use their tax code to incentivize the deposition of money in its jurisdiction. Additionally many tax havens make it fairly easy to create shell companies, which serve to conceal the identity of the individual or corporation behind a deposit. Tax havens do also make it very hard, if not impossible to exchange information about taxable assets from foreign nationals in its jurisdiction.

Profit Shifting

Profit shifting is a strategy of moving a person's income or a corporation’s profit from a region of higher income/profit tax rate to a region with a lower tax rate. Profit shifting is usually not strictly illegal, however it has a façade of legality by using loopholes in the tax code of different countries in order to achieve tax avoidance.

2.2. Methods of tax evasion

In today’s globalized society and with skillful application of modern technology there are many ways to commit tax evasion and to conceal evidence of doing so. Since the world is becoming increasing complex and intransparent, it has become increasingly difficult to track down and prosecute tax evaders. It is of extreme difficulty for a revenue service to find out, which individuals in a nation of millions are committing tax evasion by either hiding or by giving wrong data to the government. 5

Nevertheless, revenue services have been able to track down some tax evaders and thus, have recognized certain recurring patterns, i.e. techniques that are commonly used. In order to counter tax evasion it is of great importance to be aware of the methods that are used frequently. Below you will find a short analysis of the most common methods of (modern) tax evasion.

Underreporting of Income

This is one the most common method of tax evasion, since every individual is obliged to report their annual income to their revenue service at their own discretion. An individual may declare a different amount of income in order to reduce the tax burden. A lower income results in a lower tax burden. Since the revenue service has no option of knowing the exact income of an individual in its jurisdiction, the risk of getting caught is relatively low. However, there is still a risk with this method: the employer. When the revenue service is conducting a tax audit and is following up on certain suspicious or randomly picked individuals, it might request some information from companies, including the annual income of its employees. Therefore, there are statistically far more cases of underreporting from self-employed citizens than of employees of large corporations. Another crucial issue on the problem of underreporting lies within the payment method: Especially in the self-employed sector, businesses are (mostly) carried out via cash payments. As cash leaves no paper trail, such as invoices, it has often become very difficult to carry out a tax audit with a clear result. Another important factor in this category is tax negligence, i.e. wrong reports about the income due to lack of information or knowledge about the tax code. Errors are a frequent phenomenon in this case due to the complexity of the regulations and provisions themselves. Since the average citizen might not know which of their belongings and assets should be included in their tax return, it is obvious that this problem lies in the tax code and the information regarding its application.

Offshore accounts in tax havens:

As mentioned above, there are some countries, which are ideal for depositing and hiding money. This is mostly due to the fact that deposits in these countries are connected with low or non-existent levels of taxation. Furthermore, tax havens usually have a policy, which prohibits their banks from giving out any information to foreign governments, even if it is about a tax audit that concerns one of their nationals. As a result, it has become extremely difficult for revenue services to track the offshore bank accounts of their citizens. However, there is one positive thing about this method of tax evasion: if an individual is actually caught hiding money in an offshore account, they are not in the position to make the claim that this was due to negligence or misinformation. In such a case, the revenue service can safely assume that the tax evader did not accidentally deposit millions in an offshore account and it can immediately prosecute him. At this point, it is important to

6 remind you of the fact that not all nontaxed assets in tax havens are illegal and constitute tax evasion, since they might constitute cases of tax avoidance.

Money Laundering

Although not directly connected to activities surrounding tax evasion, money laundering is an excellent way of evading taxes, since it conceals the source and the amount of income. It is usually connected with illegal income, such as money originating from illegal operation and drug deals, and with the right application of this method, criminals are usually able to hide away the money completely by creating a “front / shell company”. Such a company serves no particular purpose other than creating the impression of a legal and thriving business. The tax evaders create fake invoices and documents, to keep up the illusion of the company. Another method involves the creation of hundreds of separate banks accounts all around the world that usually run on different names. Then, through innumerable financial transaction between these accounts, the tax evader disguises his tracks by storing only small parts of his money in each account. Nevertheless, money laundering does not play a crucial role in the discussions about tax evading activities, since only a minor amount of taxes has been evaded through this channel. Delegates should therefor rather focus on tackling the other methods.

2.3. Consequences of Tax Evasion

Tax evasion is classified as a crime in most jurisdictions for a particular reason: it has a huge impact on the global economy, there are estimates that trillions of dollars have been hidden from the revenue services. This money is essential for many countries, especially for countries with an underdeveloped or developing economy, since it is an urgent matter to cover the gap between public expenditures and public revenue. When someone pays less tax than owed, the government receives less money than it should. This means that it has less money to spend on projects that are aimed at further developing the country, the standard of living and the quality of life of its citizens. Thus, it inhibits economic growth and other economic objectives. Economic growth is a priority for the G20 and thus resolving the issue of tax evasion, which in many cases prevents economic growth, is of great significance. Furthermore, businesses that engage in tax evasion end up having an unfair advantage compared to businesses that completely comply with the tax code because they end up possessing more capital, which they can then use to solidify their comparatively dominant position in the market. This therefore reduces business competitiveness and may cause firms that operate fully according to the law to become insolvent and close down. Additionally, individuals who hide money and do not pay the correct amount of taxes exacerbate the difficult financial position of the rest of the law abiding citizens; firstly because the government will have less money to spend for their benefit and secondly because the government may be forced to increase taxation (e.g. income tax and/or VAT) in order to compensate for the loss. 7

2.4. Case Study

The so called Double Irish with a Dutch Sandwich is a preferred strategy by multinational corporations like Google (or as it is now Alphabet), Apple, amazon or Starbucks. This strategy uses particular aspects of Irish Business Law.

A company, say Google creates 2 subsidiaries in Ireland. Subsidiary 1 owns the licensing rights to the patents of the parent corporation. The interesting thing with this subsidiary is, that its headquarters are not in Ireland itself but in another country, which usually is a tax haven country like the Bermudas.

The second subsidiary pays its income as royalties to the first subsidiary. By doing so subsidiary number 2 is not obliged to pay taxes in Ireland, which are marginal nonetheless.

In order to avoid the withholding tax, which would have to be paid for a direct transfer between the two subsidiaries another subsidiary is created. This third subsidiary is usually located in the Netherlands. The third subsidiary receives the money from the second (Irish) subsidiary and in turn transfers it onwards to the first subsidiary in the tax haven. This allows the subsidiaries and the corporation behind it to avoid paying most of their taxes in Europe or the countries they actually do business in.

For example Google licenses its innovations and products to the Google Ireland Holdings which is headquartered in the Bermudas (this would be subsidiary 1). The subsidiary of this is Google Ireland Limited (Subsidiary 2). Google Ireland Limited employs about 2000 people in Dublin. It had a profit of less than 1% of its actual revenue in 2008 but transferred 5.4 billion US Dollars to Google Ireland Holdings (subsidiary 1).

As a facilitator serves the Google Netherlands Holding B.V. in the Netherlands, which according to Bloomberg has no employees and transfers 99,8% of its revenue to the Bermudas.

Since 2015 corporations cannot be registered in Ireland without paying taxes there. This means the loophole many multinationals exploit has been closed. However there is a transitional period for corporations already operating in the way described above until 2020.

Below you will find a graphic which details the mechanism of the Double Irish with a Dutch Sandwich.

Source: The New York Times

3. Major International Actions and Relevant Actors

Since the London Summit in April 2009, the OECD has been the at the frontline of a major overhaul of the international tax architecture, which target is combatting tax evasion, ending bank secrecy and tax havens, as well as addressing massive tax avoidance by multinational corporations.

Global Forum on Transparency and Exchange of Information for Tax Purposes

The work of the Global Forum on Transparency and the Exchange of Information for Tax Purposes, hosted and supported by the OECD, has been instrumental to achieve the remarkable progress in the realm of international tax transparency and information exchange. The Global Forum was restructured in September 2009 in response to a G20 request to strengthen the implementation of these standards and to launch an ambitious peer-review process of national legislation in the realm of tax transparency. The Global Forum now has 130 members and 15 observers, with over half its members being developing countries. By now it has completed the reviews of jurisdictions laws’ and their compliance with the international standard for the vast majority of its member jurisdictions.

Automatic Exchange of Information (AEoI)

The G20 countries have shown growing interest in promoting automatic information exchange as a tool to improve international tax compliance. Beginning in June of 2012, the OECD has worked on the Automatic Exchange of Information within the context of the G20. At the Leaders’ Summit in Brisbane, the new global Common Reporting Standard for AEoI was endorsed with countries to begin implementation as soon as possible, with a deadline at the end of 2018. The Multilateral Convention on Mutual Administrative Assistance in Tax Matters, provides an effective multilateral platform for widespread adoption and use of automatic exchange of information. The Convention was updated and opened to all countries at the request of the G20, and the amended Convention provides for all possible forms of administrative co-operation between states. The Convention contains strict rules on confidentiality and proper use, and permits automatic exchange of information. All G20 countries have signed or committed to sign the amended Convention and have consistently encouraged all countries to join.

Even before its actual implementation, the impacts of AEoI are already being realized: €48 billion in revenue has been voluntarily disclosed thus far in 2015, against €37 billion last year. That makes the AEoI an economically sound choice, as well as a quantum leap to creating a more transparent and fair tax system.

Base Erosion Profit Shifting (BEPS)

Implemented at the request of the G20, the work to tackle base erosion and profit shifting (BEPS) is based on the 2013 G20/OECD BEPS Action Plan, which identified 15 actions to curb international tax avoidance. The package of measures is structured around three fundamental pillars: introducing coherence in the domestic rules that affect cross-border activities; reinforcing substance requirements in the existing international standards, to ensure alignment of taxation with the location of economic activity and value creation; and improving transparency, as well as certainty for businesses and governments.

BEPS is a global problem which requires global solutions. For the first time ever in tax matters, OECD and G20 countries worked together on an equal footing. More than a dozen developing countries have participated directly in the work and more than 80 non-OECD, non-G20 jurisdictions have provided input.

The BEPS package, which was endorsed by G20 Finance Ministers during their meeting of 8 October in Lima, equips governments with the domestic and international instruments needed to tackle BEPS. G20 Leaders followed in suit to endorse the BEPS package during their summit on 15-16 November in Antalya, Turkey.

The Antalya Leaders communiqué also called on the OECD “to develop an inclusive framework by early 2016 with the involvement of interested non-G20 countries and jurisdictions which commit to implement the BEPS project, including developing economies, on an equal footing.” This demonstrates a commitment for a rapid, widespread and consistent implementation of these measures with all interested countries and jurisdictions, on an equal footing.

Domestic Resource Mobilization (DRM)

The topic of Domestic Resource Mobilization was emphasized as a pillar in the G20 Multi- Year Action Plan, adopted at the 2010 Summit in Seoul. Since then, the OECD has been working with other IOs to ensure developing countries will be in a position to benefit from the new international tax environment (LIDCs pilots for Automatic Exchange of Information, toolkits for an effective use of tax incentives, access to quality transfer pricing comparability data, etc.). Together they have developed dedicated initiatives such as Tax Inspectors without Borders (in partnership with UNDP) and partnerships with other IOs (IMF, WBG, RDBs) and regional tax organizations (e.g. ATAF). The Tax Inspectors Without Borders initiative received strong support from the G20 Leaders at the Saint Petersburg Summit, and is currently being rolled out as of July 2015.

4. Major actors and Problems that arise

The Organization for Economic Co-Operation and Development

The Organization for Economic Co-operation and Development was created with the idea of designing, promoting, and improving the financial policies of the world so that the economic and the social well-being of the public would be improved around the world. They collect and analyze data extensively using the collected information as a basis to build upon. With access to the information of all UN member states the OECD has come up with multiple documents upon this topic, which can be used by all governments. They have extensively worked to combat this issue of tax avoidance and have taken a strong stance to combat this issue.

Sovereign Countries

The issue of tax evasion in one way or another directly affects every country. As previously stated, many nations wish to create a transparent global network of exchange of information, so as to catch tax evaders, whereas intransparent financial transactions are a basic part of the policy of certain countries, such as tax havens. This delicate political dispute has to be resolved with all necessary attention, while governments should try to focus more on how to catch tax evaders. Many countries have not been putting enough effort in the investigation of tax evasion, while only a few countries seem to be cooperative on an international level. Nevertheless, the situation in the world has improved a lot in the past few years, as there have been many multilateral agreements and efforts of nations with the purpose of tracking down tax evaders. For example, there has been (quite surprisingly) a bilateral agreement between Switzerland and the USA about the automatic exchange of information between the national authorities and the banks of the two countries with the purpose of tracking down tax evaders, who have deposited their untaxed money in each other’s country.

Tax Haven Countries

Tax haven countries such as Switzerland, Luxembourg, or Panama play a big role in encouraging offshore tax evasion. They have low tax rates (or even no tax on specific incomes) and incentivize individuals and firms to open up bank accounts overseas and save their money there. Moreover, these countries also passed laws and regulations that not only promote strict confidentiality on the true owners of banking accounts, but also sometimes prohibit sharing the identities of account holders (e.g. Switzerland). Besides, the national tax laws in those tax havens often do not require the individuals to comply with international reporting requirements. All these measures mean that those countries (often) actively encourage individuals and businesses to avoid paying taxes to their country of residence.

European Union

The European Union has carried out some of the most effective and toughest measures against tax evasion. Being a supranational organization, which supports transparency and the free exchange of goods and information between its member states, it has contributed a lot to the solution of the problem by promoting multilateral agreements within its jurisdiction. Specifically, bank secrecy, as it exists in many tax havens, has been prohibited by EU legislation. Furthermore, the EU has created a system of common taxpayer identification numbers in its member states, as proper identification of taxpayers is an essential step in the fight against tax fraud and evasion. Enhanced collaboration between member states has also made the automatic exchange of information faster and more efficient, as European tax administrations have far better and easier access to information in other countries than they did in the past. The Commission of the European Union, in light of the revelations arising out of the Panama Papers, has recently published its next steps to ensure transparency and to combat tax abuse. These actions include providing the national tax authorities the information required to identify tax evaders as well as extending the scope of information and automating this process, enhancing oversight of tax advisors, promoting good governance as well as developing a list of countries that do not meet these standards and finally, the improvement of whistle-blower protection. While these steps undertaken by the European Union mean great progress, there are still a lot of things to be done.

United Kingdom

The UK is a special case regarding our topic, since it faces many obstacles in the fight against tax evasion: its 14 overseas territories. The UK faces many problems with their administration because quite a few of them are considered tax havens. UK officials have expressed their willingness of closing in on tax evasion and reducing the tax gap in their country, but the fact that their overseas territories, such as the British Virgin Islands, are the place to go to for tax evaders makes this task very hard to accomplish. Currently, the UK has launched many new programs and has funded its revenue service with more resources and modern technology tools to crack down on tax evasion. But since some of the primary tax havens do lie within the general jurisdiction of the UK this task may mean a fundamental change in the relations between the UK itself and its territories.

United States

In the past USA did not really impose any strict regulations on individuals which desired to keep their assets in offshore accounts. Lately, the US government has changed its policy towards enforcing new laws that would help identifying which citizens are using offshore bank accounts to evade paying domestic taxes. The USA has passed the Foreign Account Tax Compliance Act (FATC) in order to address tax evasion. As a consequence, any foreign 13 financial institution is legally required to report accounts that belong to US citizens and residents to the IRS. Failure to comply with the act will result in a penalty in the amount of 30% of the financial institution’s income (For instance, UBS admitted it allowed US citizens to use their bank as a tool of hiding their true assets and had to pay a 780 million USD fine in 2009). In addition, the Treasury has negotiated more than 100 intergovernmental agreements (IGA) with different countries – including Switzerland. Under these bilateral agreements, foreign banks can pass on information about US accounts to their governments, who in turn inform the IRS. These agreements legalize the interaction between foreign governments and the IRS, which had been illegal before the signing of the IGA. Apart from fighting tax evasion, the USA also began to tackle the issue of tax avoidance: In light of the Panama Papers, former President Obama declared that “There is no doubt that the problem of global tax avoidance generally is a huge problem. The problem is that a lot of this stuff is legal, not illegal.” Subsequently, he declared that he would undertake executive action in order to tackle the issues of international tax avoidance, in particular by closing legal loopholes. The initial package presented by the White House, comprising mainly of transparency measures that include the closing of loopholes that have allowed foreign individuals and companies to hide their financial activity in the US in an anonymous manner and more rigorous “customer due diligence” measures for financial institutions in charge of handling money on behalf of patrons

5. Questions a Resolution Must Adress

1. Is an international tax regulation necessary in the dawn of the post financial crisis era?

2. Apart from combating tax evasion, tax loopholes and tax avoidance strategies what else could be included under the umbrella of an international tax regulation?

3. What can be done in order to combat tax evasion and tax avoidance? What concrete measures can be applied in bilateral, regional and international level?

4. Should international organizations such as the UN undertake a leading role in an effort to promote the abovementioned international tax reform? Alternatively, should international forums such as the G20 take the lead in proposing measures and actions combatting international tax evasion? 5. In which way should the G20 address and tackle the issue of tax havens? 6. Are there any further challenges concerning international taxation that needed to be addressed by the G20? What does future hold for us? 7. In the light of the recent events concerning the Panama Papers, should governments utilize (illegally) acquired information such as offshore leaks? If yes, should the international community create guidelines on how to deal with offshore leaks?

6. Useful resources and links

- http://www.taxjustice.net/faq/ - Basic overview of the problems surrounding international taxation - http://www.oecd.org/ctp/ - Here you can find an overview of the work of the OECD in coordination with the G20 - https://www.oecd.org/ctp/BEPSActionPlan.pdf - This is the proposed plan of the OECD/G20 on how to combat tax evasion and tax avoidance - http://www.oecd.org/ctp/exchange-of-tax-information/convention-on-mutual- administrative-assistance-in-tax-matters.htm - The proposed plan by the OECD/G20 on the exchange of information on taxation - http://ec.europa.eu/taxation_customs/business/company-tax_en - Here you can find a quick overview on what the European Union has proposed in order to tackle tax evasion and avoidance - https://www.theguardian.com/news/series/panama-papers - This series of articles provide you with more information on the recent scandal of offshore tax evasion and the involvement of high-ranking government officials (and other celebrities) in tax evading activities

II. FOOD SECURITY

1. Introduction to the Topic

Imagine not being able to have a little snack when you are hungry. Imagine having to skip dinner. Imagine feeling tired and worn-out all the time. Imagine feeling sick because of an empty stomach. Imagine that this being your reality and not a mind game.

Sadly, being under- or malnourished is the reality almost 800 million people on this planet. Today one in nine people worldwide (795 million) suffer from malnutrition, the majority living in developing countries where 12.5 percent of the population are undernourished. Poor nutrition is the leading cause (45 percent) in deaths of children under five. Without a population that has sufficient access to food and nutrients the chances of building a strong economy are rather unlikely for developing countries. In the long term countries will depend on international aid to feed their population. Ending hunger, achieving food security and promoting sustainable agriculture is one of the 17 sustainable development goals (goal 2) and is therefore of very high importance: ''If done right, agriculture, forestry and fisheries can provide nutritious food for all and generate decent incomes, while supporting people-centered rural development and protecting the environment".

Hunger is more severe than not being able to perform well economically. Food (along with sleep and shelter) is our deepest human need. We cannot thrive without it. We cannot live in dignity. We will never be equal. It’s a basic human right that all people on this planet should have.

The issue is complex: we live on a planet with a fast growing population but resources are more and more limited. In the future we will have to produce more food with less resources. More importantly it needs to be distributed equally and fairly among the world population. This has to be our aim for the future.

The G 20 can do its part to fulfill that goal. Without satisfying the basic human need of having enough food to eat equality between developed and developing countries cannot be achieved.

2. Definition

Food Security as a concept is hard to define. In the existing literature there are about 200 different definitions. In order to have a common ground on debate the FAO first defined food security in 1974 during the World Food Summit as “availability at all times of adequate world food supplies of basic foodstuff to sustain a steady expansion of food consumption and to offset fluctuations in production and prices”. In 1983 the definition was extended and now also included the issue of access and not just availability. In the 1990s the global concern about food security grew as it become clear that the issue was not a crisis on the

16 individual level but on the global. Additionally, the concept of human security was introduced by the UNDP in 1994 which but a larger emphasis of untraditional concepts of security such as economic security, health security, environmental security and so on. It put a greater emphasis on security on the individual level. The concept was redefined in 2001: “Food security [is] a situation that exists when all people, at all times, have physical, social and economic access to sufficient, safe and nutritious food that meets their dietary needs and food preferences for an active and healthy life”.

In summary, food security has four dimensions: access, availability, utilization and stability. All of them have to be achieved for global food security. Availability describes the physical existence of food. All problems regarding food exports, water usage/droughts, land degradation, climate change, population growth etc. fall into this category. Access refers to whether or not a household can afford to buy sufficient food which depends on the household income as well as market prices. Additionally, it also refers to having physical access which requires a sufficient infrastructure in food distribution. Utilization (and Use) describes the socio-economic factors of food security. Food does not only need to be accessible and available but households also need to have knowledge about prober nutrition and hygiene standards. Along these aspects go the knowledge about proper health care and food storage. Having access to clean drinking water plays a very important role in this aspect as it is crucial for households to be able to prepare safe meals. However drinking water often gets contaminated through human, industrial or agricultural waste which results in more than 800 million people not having access to clean water. Stability is rather self-explanatory and refers to the temporal dimension of the concept. Food security is considered to be stable after household food supplies have been at a stable level for more than one year. Additionally, it refers to how resilient the system is when it comes to minimalizing external risks such as natural disaster, climate change, price changes, conflicts and epidemics. In such events there have to be measures to support households in a timely manner. Such measures include insurances (e.g. against environmental damage of yield) but also sustainable agriculture, biodiversity and protection of the environment.

3. Who is affected by food insecurity?

As already mentioned in the introduction, despite all the progress made there are around 795 million people undernourished today which is one in nine people on earth. The vast majority (780 million) is living in developing countries. Great progress has also been made in developing countries. However, the progress is uneven across regions. Fast progress in reducing hunger has been made in Caucasus, Central Asia, Eastern Asia, Latin America and Northern Africa. Considerable progress but at a slower paste has been made in the Caribbean, Oceania and Western Asia. In two regions, Southern Asia and Sub-Saharan Africa have only made slow progress. Some countries in the regions have made progress but hunger, undernourishment and other forms of malnutrition remain at overall high. In Sub-Saharan Africa 23.2 percent of the population are undernourished.

As with many aspects inequality does start with different countries but on the individual household level. A 2011 UNICEF report found that a high percentage of female teenagers (15 to 19 years old) in Sub-Saharan Africa and South Asia were suffering from anemia (highest Mail with 68 percent) and weight insufficiency (highest India with 47 percent). Their male counterparts suffer less. These are just some of the many disparities between boys and girls in the field of nutrition that the report found.

A different study looked into the eating habits of 2000 teenagers in Southern Ethiopia. The study showed that boys and girls are treated differently once access to food becomes challenging. In the study 25 percent of females experienced food insecurity compared to 16 percent of males. Boys were generally fed first and received food of better quality. In Ethiopia boys are considered to have a more important role both economically and religiously. Consequently, in order to achieve food security one also has to put the social status of girls and women into consideration.

4. Problems and Solutions

4.1 Biofuels

The topic of biofuels is by nature controversial. On the one hand millions of people are starving and on the other hand we are using food that these people need for green energies. How can these technologies by used in a sustainable manner and should they be used after all?

Firstly, it has to be said that agriculture has always produced food but also non-food commodities. The global agriculture system has responded to changes in demand. Until the early 20th century transportation depended heavily on biofuels. However, not in the form of clean fuels for cars but in the form of food for draft animals.

Even if no biofuels would be produced a large proportion of fields would still be used for nonfood crops (animal feed, cotton, tobacco). Around one third of the world cereal production and three fifth of the worlds grain is used for animal feed alone.

The debate on biofuels usually revolves around the issue of higher food prices for consumer and how that could impact communities. What is usually not considered is that biofuels could also generate economic growth especially in developing countries. According to a 2008 World Development Report agriculture is a key driver of economic growth and poverty reduction for 75 percent of the worlds’ poorest.

However, in general almost all dimensions of food security (availability, access and stability) could be affected by biofuel developments, especially when it comes to food prices. Between 2006 and 2007 the world food prices doubled. It is expected that biofuel demands could increase prices for basic foods by around 15 percent over the next decade. In the poorest quarter of the population in developing countries 70 percent of the available income is spend on food alone. This proportion of the population is very vulnerable to food price increases. Nevertheless, small farmers who are net food producers could on the other hand benefit from higher food prices as it would increase their income and get them out of poverty. They would only be able to benefit if they as local producers could reach global markets to sell their goods. However, the poorest of the poor are usually landless and live in rural areas. They would not be able to benefit from biofuels. On the contrary, biofuels could harm them the most.

4.2 Food Production

In total the earth’s surface makes up around 13.4 billion hectare. Eleven percent of this are currently cultivated for agricultural use. In theory, 2.9 billion hectare would be suitable to be cultivated worldwide. However, around 20 percent of this consists of forest and/or is under environmental protection. There would be not only large environmental but also

20 social costs to use this land if it is even possible as there are certain laws for environmental protection in place.

There are great regional disparities of where is unused land is located. Most unused suitable land is located in South America (320 million hectare) and Sub-Saharan Africa (460 million hectare). However, in other regions countries are already producing at or even above their potential, namely the highly populated areas of South, Southeast and East Asia.

It is possible for a country to produce above its natural potential through intensification techniques such as multiple cropping, irrigation. Other forms of intensification are for example adoption of modern cultivars, pest, and nutrient management and by using other improved theologies. Some countries could greatly increase their yields by applying these techniques. Southern Africa could increase their production by 53 percent, Western Asia by 80 percent and Central Asia by 231 percent. However, in the highly populated areas in Asia and Europe there can only be limited gains made. Almost 60 percent of global crop area is suitable for multiple cropping and other intensification techniques.

Overall there have been major growths in the world food production. Worldwide cereal production increased from 1.192 metric tons in 1970 to 2.252 metric tons in 2004 while crop area stayed around the same. Intensification techniques have already shown to be successful. Yields went from 1.77 tons per hectare to 3.31 tons per hectare. Additionally, cereal prices also by around 50 percent in real terms during that time frame. Cereal supplies were exceeding the demand. Countries, which improved food security (for example Indonesia) achieved it by increasing the crop productivity per hectare per day. Thus, growth could get shared between producer (through larger incomes) and consumers (through lower prices). In some areas increased food supplies lower food prices and was able to generate rapid growth among the population. Global undernourishment went from 30 percent in the 1970s to around 15 percent in the 2000s. China for example was able to reduce hunger and poverty by around 200 million people through major economic growth.

In addition to grains animal products are also a major source of nutrition. Over half of the world’s population get the majority of their animal protein from seafood. Roughly 80 million metric tons of fish are generated from the ocean each year (1992) which is not a lot compared to the 1.800 metric tons of grains which are consumed annually. Unfortunately, fishery puts a great strain on the environment. In theory, sustainable fishing is possible until a yield is at 100 million tons of fish per year. However, this can only be achieved by extremely careful fishery management, protection and restoration of coastal and wetlands and restriction of ocean pollution. With the current state of the ocean this does not seem realistic. With the current overexploitation of the ocean the fish stocks will collapse at one point or another. Consequently, as a result of overfishing and degradation will reduce the oceans potential to feed a growing world population in the future. When reduced many fish populations only recover very slowly if at all. On the one hand, aquacultures might be able to replace some of the lost fish yields. Aquaculture yields have been rising in recent years. On the other hand, aquaculture also causes great environmental costs and risks. 21

The question is not really if enough food can be produced but if it can be distributed. Food shortages in many developing countries can be traced back to maldistribution resulting from poverty and related economic factors such as inequalities in the world trade system. In the year 1992, the worlds harvest could have fed six billion people on a vegetarian diet (world population was 5.5 billion in 1992). With a diet consisting of 15 percent animal products (typical in South America) it would only be able to feed around four billion people. If 30 percent of calories come from animal products (typical for a diet in most rich countries) only a population of two billion people could be supplied with food. Of course these numbers are only estimates but it underlines the notion that “hunger is just a problem of distribution”.

What will worsen the situation in the future is the rapidly growing world population. Today there are 7.4 billion people on earth. The number is expected to reach 8.5 billion in 2030, 9.7 in 2050 and 11.2 in 2100. Additionally, income levels are expected to increase as well. The task is to feed an increasingly larger and richer world population. As to be expected neither growth not wealth will be distributed evenly. As the global wealth increases the demand for less healthy and less environmentally friendly Western-style diets is expected to increase as well. It will be a strain on the double burden of malnutrition: undernutrition and obesity. In 2015 more than 1.9 billion adults worldwide were overweight while 462 million were underweight.

4.3 Environmental Impact

Even though it would theoretically be possible a continuing growth of harvest is going to be difficult based on the fact that our planet only has limited resources. In a number of area our modern industrialized agriculture already caused severe damage.

When it comes to generating more fertile farmland it might be only possible when sacrificing various natural resources. A great majority of possible farmland (e.g. that under tropical forest) is occupied by nature’s natural ecosystem. These ecosystems are vital when it comes to supporting the human species (storing carbon, supply fresh water etc.). Additionally, tropical forest is not suitable for farming as it quickly degrades to wasteland. Fertile farmland is also often turned into urban areas to please the growing demands of urbanization such as population growth, urban migration and industrialization.

Our soil is also a vital part of our ecosystem. Soil contains billions of tiny organisms which are tied to the diversity of life in general. These organisms are primarily recycling and mobilizing nutrients in agricultural soul. They are however, threatened by many aspects of our modern agriculture. Since 1945, eleven percent of the world’s agricultural land has suffered moderate or extreme degradation, six percent have even been highly damaged and can no longer be used for agricultural purposes. As a result the productivity of damaged land has been reduced. In North America by around five percent, Europe by 17

22 percent and Mexico and Central America even by 24 percent. The major reasons for this development are deforestation, overgrazing and of course industrial agriculture.

There are numerous reasons why biodiversity is highly important for agricultural productivity. Plants, animals and microorganisms are essential to support human civilization and at the same time agriculture such as the maintaining the gaseous composition of the atmosphere, moderation of climate, recycling of nutrients, control of insects and maintenance of a vast genetic library. Biodiversity is lost at a rate which may cause the extinction of 25 percent of all species by 2015. With every distinct species a genetic pool is lost forever. Only very few plants are used as crops in today’s agriculture. There are more than 250.000 species of higher plants which might potentially be used as crops. Around 75.000 plants have been discovered to have edible parts but only around 7500 are used by human civilization as food. With the loss of genetic biodiversity a great potential for developing new food sources is lost as well.

Today’s highly yield agriculture was primarily possible through vast genetic diversity and evolutionary plant genetics. In this process traditional crop varieties are used and through selective breeding produce new varieties with different features. Genetic diversity is the basic resource for this process and is consequently necessary for continuing a high yield agriculture. However, this genetic diversity is in danger as farmers around the world are only using very few genetically similar crops. At the same time the natural habitats of wild crops are being destroyed.

One of the basic principles of modern agriculture is the vast use of fertilizers which has resulted in an increased growth rate and seed production. Between 1950 and 1990 the global use of chemical fertilizers has increased ten times. As a result the global grain production increased by a factor of three. Unfortunately, this success are unlikely to be repeated. In developed countries fertilizers are already used to a point where returns are diminishing. In developing countries there is still room for improvement in yields. However, farmers who are financially able to buy fertilizers are already doing so.

With all the success fertilizers has brought, there are also downsides. Fertilizers often cause pollution of the surface as well as ground water. They can damage forests and other ecosystems and cause greenhouse gases. At the same time, the manufacture of fertilizers also depends on whether or not fossil fuels are available at low prices as they are need as both raw materials and for the energy-intensive nitrogen-fixing process.

Industrial Agriculture has also affected water management. Water is being overdrawn for agricultural use with evident consequences. Irrigation water is being pumped faster than aqulters are able to recharge. As a result water tables are dropping.

As much as industrial agriculture has damaged the environment, the consequences will also cause the global agricultural production to suffer. Air pollution can reduce productivity as they are toxic to crops. Acid depositions are also damaging to crops as well as freshwater fishery. 23

Global warming will be one of the great challenges of the 21th century. As for agriculture, some areas might actually profit from climate change as they will become more productive. Others will be not so lucky and lose productivity. This is caused by a shift in climatic zones. Another risk is the rise in sea level. Coastal areas are in danger of farmland being flooded or being hit by storms more frequently.

We are faced with a paradox. On the one hand most of the damage to the environment (deforestation, desertification, wetland destruction, toxic pollution of air, water and land, releases of greenhouse gases etc.) are a direct consequence of humanities struggle to feed its fast growing population. On the other hand, because of that caused pollution and environmental destruction future generations will struggle even more to feed an even faster growing even bigger world population.

Current predictions for global warming are expecting an increase in the average global temperature between 0.6 – four degrees Celsius. The Paris climate agreement set out a global action plan to limit global warming to two degrees during this century. This goal will be difficult to achieve given that there will be a large increase in food demand while agricultural food production is accounting for more than 30 percent of all greenhouse gas emissions.

4.4 Food Prices

In 2007-2008 global food prices skyrocket as a symptom of a global food crisis. In 2011 food prices went even above the peak of 2008. Some of the reason were a rising demand in developing countries as well as several weather events such as a drought in Russia and Ukraine and a dry spell in North China). Both in 2008 and 2011 there were export bans, food riots, panic buying and emergency price control. Since June 2010 more than 44 million people were pushed into extreme poverty as a direct result of the spike in food prices according to the World Bank. The FAO identified Mozambique, Uganda, Mali, Niger and Somalia in Africa, Kyrgyzstan and Tajikistan in Asia and Haiti, Guatemala, Bolivia and Honduras in Latin America as extremely vulnerable to changing food prices.

Advocates of free trade demand the opening of countries to the imports of food as consumers should have access to the cheapest foods. However, the world market is dominated by large agrifood companies and by subsidized agricultures of Western countries. This leads to tough competition for small producers from developing countries who have trouble generating enough income to survive from their production. Production costs are sometimes higher than imported food. As a result food dependency of many developing countries has increased. In Western Africa rice imports are eight times as high as in 1960, meat imports tripled in the last 20 years. In order to combat this issue a network of producers has been created to advocate and defend their right to food sovereignty. Their criticism is not only directed towards the WTO with the goal of changing the rules but

24 their commitment is also dedicated towards governments who should support local producers.

4.5 Economic Impact

Having adequate nutrition is not only an issue of basic human dignity but it also effects economic development. Up to a billion people are unable to receive sufficient calories and nutrients from their food to carry on normal activities. Hunger does not only cause individual suffering but it also has negative impacts on the economy of developing countries as it reduces the productivity of the work force. Millions of undernourished children are not able to fulfil their educational potential which again reduces the productivity of the next generation. Additionally, it makes a population vulnerable to epidemics such as AIDS, Ebola, influenza, drug-resistant tuberculosis and more. This can cause threats to the political stability of a nation.

A recent World Food Program report about the situation of food security in Bangladesh stated that undernutrition costs Bangladesh around one billion dollars annually in productivity lost and even more in health care costs. “No country can expect to build a thriving economy on the back of hungry and undernourished people”. The team of researchers who were in charge of the report had similar findings in other developing countries .

The big danger is that developing countries will depend on rich countries to feed their population in the long term. Food or income transfer cannot be the key principle to end food insecurity. A heavy dependency could discourage local production. More importantly it could create an unhealthy dependency of poor nations or individuals on rich nations, agencies or individuals. Poor people (and countries) simply lack access to food which can only be changed by alleviating poverty itself.

5. What the Group of Twenty has done so far

Mostly, the G20 has primarily worked in close cooperation with the OECD on the issue of food security. Although this issue has been predominantly tackled by the UN and its sub- bodies and agencies, the G20 has also proposed several initiatives on this agenda. Among these, the most important initiatives are:

Agricultural Market Information System (AMIS)

AMIS seeks to strengthen collaboration and dialogue amongst the main producing, exporting and importing countries. The focus of AMIS is on four crops that are particularly important in international food markets, namely wheat, maize, rice and soybeans. AMIS has three objectives:

1. Improve the information base on crops production, trade, utilization and stocks and to disseminate this information in a transparent manner;

2. Build capacity to produce detailed food commodity market data; and

3. Facilitate policy dialogue and co-ordination in the event of a development impacting agriculture in commodity markets.

The OCED/G20 contributes actively to the AMIS with the aim of addressing food price volatility through more timely, accurate and transparent information on global food markets.

G20 Food Security and Nutrition Framework (FSNF)

This Framework, included in the G20 Leaders’ Declaration of the 2013 summit, was designed to provide the basis for a long-term, integrated, and sustainable food systems approach to food security and nutrition, recognizing that action is needed both within and beyond the agricultural sector. The Framework set out three priority objectives to integrate food security and nutrition efforts at the global level and within lower income countries.

The first objective is to increase responsible investment in food systems throughout the world, with particular emphasis on the private sector. This goal will include strengthening food value chains, increasing access to inclusive financial services such as credit and insurance programs, improving the transparency and efficiency of local, regional, and global food and agricultural trade, and ensuring good governance in water use and land tenure. The Framework recommends several actions to meet this objective, including promoting public-private partnerships in infrastructure investment and supporting the work of AMIS to improve market transparency.

The second objective is to increase incomes and employment opportunities in food systems through developing improved labor market policies and investing in vocational training, especially for youth, smallholder farmers, and women. Social protection programs focusing on human capital investment and the productive capacity of the poor will also help improve labor markets by ensuring that working-age populations remain healthy. Recommended policies to accomplish this objective include sharing experiences among countries in terms of labor market development programs, social protection programs, and risk management services.

The final objective is to sustainably increase productivity in order to expand the global food supply. This will require increased investment in research and development, innovation, and technology transfer, particularly in terms of resource conservation and biodiversity protection. Improving rural infrastructures like irrigation and communications will play a large role in this objective, as will creating more efficient rural-urban linkages.

6. Possible Solutions

The issue of food security is as complex as humanity itself and therefore not easily solvable. A number of sources recommend a number of different solutions.

Firstly, in order to distribute the available food resources food waste would have to be reduced. Currently as much as 40 percent of the global harvest are lost. Improved Crop storage and transport facilities could reduce losses due to pests and spoilage. But also food waste in households as well as supermarkets have to be reduced even though that might not be as easily achievable as improving storage facilities. Additionally, it would be useful to use grain which is fed to animals (around one third of global grain yield) to feed people instead. For most consumers having animal products in their diet is seen as an important component of their living standard and suggests wealth and prosperity. Reducing or even removing that component of eating meat, dairy products and eggs might be socially difficult to achieve. Moreover, the global trend does not go in the direction of reducing meat consumption. As more and more developing countries are reaching a certain level of prosperity their population will want and demand more and not less animal products.

Overall it has to be said that the battle needs to be fought simultaneously in different areas with adequate funding and accountability. The WFP report on Bangladesh for example suggests a more diversified agriculture and a social protection system which uses the empowerment of women as a key principle to achieve sustainable food security.

Different countries will require a variety of different solutions. The continent of Africa for example will have to deal with the burden of in increasing population as well as with more drought risk. The focus has to be on sustainable intensification which will lead to an increase in yields while reducing waste through pest, disease and storage at the same time. For instance, one technology solution might be to develop drought resistant crops.

Africa is the only continent whose agricultural production per capita did not increase within the last 30 years. The Agricultural sector currently employs 60 percent of the population and accounts for 20 of the GDP. Thus, agriculture could be a driving force of economic and social development. The African Agricultural research forum suggest that measures such as the green revolution which increased yields in Asia and Latin America will not be successful in Africa. They suggest measures which include investments in infrastructure and the establishment of a domestic market in order to put a focus on regional development.

In developed countries on the other hand the concern is more focused on reducing health risks associated with obesity. There also needs to be a shift to a more sustainable nutrition. Diets which are healthier also tend to be better for the environment. In general, the lower the meat, fish and diary content the lower the environmental impact. However, these nutrients need to be compensated for with an increase in the quantity and variety of whole grains, fruits, vegetables and legumes.

The simple solution would be that we all demand less, eat more sustainably and be more cautious with our resources. It is now up to this committee to come up with a realistic solution during GoeMUN 2017!

7. Questions a Resolution Must Adress - What are short-term and long-term solutions to achieve food security and end world hunger? - How can the damage on the environment be limited while producing enough food to feed a growing global population? - How can food (or the resources to produce it) be distributed equally among the world population? What is the role of developed nations (e.g. consumption of animal products)? - What part does technology play in increasing productivity especially in developing countries? - How can agricultural development enhance economic growth? - What measures have to be implemented on a local and which ones on a global level? - What effects could hunger and poverty have on international security? And how does that relate to economic growth and development - How can the issue of distributing food more equally be solved? How does the consumption of animal productions relate to this? - What are local, small scale measure to combat food insecurity in developing countries? What about emergencies such as natural disaster or rising prices?

8. Useful Resources and Links - The World According to Monsanto (2008) https://www.youtube.com/watch?v=gf71ylEbqUk (German) and https://www.youtube.com/watch?v=N6_DbVdVo-k (English) - Cowspiracy – The Sustainability Secret (2014) https://www.youtube.com/watch?v=nV04zyfLyN4 (Trailer) available on Netflix - We feed the World (2006) - Our daily bread – Unser täglich Brot (2005) - Food Inc.(2009) https://www.youtube.com/watch?v=dbMW2Lf8za4 (English, low quality) This is just a short selection of documentaries that are interesting to watch as a kick off for your research. Not all of them are available on YouTube but you might be able to watch it through several streaming platforms like Amazon Prime and Netflix. If you are able I would highly recommend watching at least one or two of these.

- http://www.economist.com/blogs/economist-explains/2015/06/economist- explains-13?zid=318&ah=ac379c09c1c3fb67e0e8fd1964d5247f The Economist: Is the World running out of food? - http://www.economist.com/news/international/21635046-world-has-terrible- record-improving-peoples-diets-may-be-changing-feast- and?zid=318&ah=ac379c09c1c3fb67e0e8fd1964d5247f The Economist: Malnutrition, Nutrients and Obesity – Feast and Famine - https://www.oecd.org/g20/topics/agriculture-food-security/ OECD’s work on food security - http://www.un.org/sustainabledevelopment/hunger/ UN Sustainable Development Goals - http://www.fao.org/home/en/ Food and Agricultural Organization of the United Nations - http://www1.wfp.org/ World Food Programme