Bidding the GTC good-bye

Nader Noureddin , Tuesday 14 Mar 2023

Nader Noureddin presents his take on why Egypt has withdrawn from the UN Grains Trade Convention

Rising inflation and interest rates


The UN Grains Trade Convention (GTC), which Egypt joined in 1995, aims to encourage international trade in grains, towards which end it promotes transparency and the exchange of information among its members and discourages speculation in grain markets or the exploitation of crises to drive up prices.

The convention covers unprocessed and processed forms of three main grain staples, namely wheat, corn, and rice, as well as barley, oats, sorghum, and other grains.

Egypt is a major force in the international grain trade. It tops the international wheat importers list with an import volume of 12 million tons a year, or about six per cent of the total volume of the global trade in wheat. It imports 12 million tons of the 50 million tons of maize traded globally, and it once exported two million tons of rice, though now it is a net importer.

The Egyptian economy has been hit hard by soaring food prices as a result of the Russia-Ukraine war. Expenditures on imports of strategic foodstuffs, such as grains and food oil, have doubled from $15 billion to $30 billion a year. The resultant depletion in Egypt’s foreign-exchange reserves has caused dollar liquidity to shrink, and this, when combined with the declining value of the Egyptian pound against the dollar, has precipitated rising inflation rates and unprecedented hikes in retail food prices.

The impact on the limited-income sector, who makes up 60 per cent of the population, has been particularly severe.

Egypt had expected that the GTC executive committee, a body formed in accordance with a convention intended to uphold fair, honest, and equitable trade, would take serious steps to prevent the exploitation of the Ukraine crisis to jack up food prices. US wheat has more than doubled in price from $250 million per ton to $520 million a ton, breaking its previous record of skyrocketing to $480 million a ton during the 2010-11 food price crisis, for example. Similarly, maize prices have climbed from $200 to $450 a ton, setting another record.

Egypt probably feels that those responsible for the implementation of the GTC have failed to uphold provisions regarding transparency and non-exploitation of global crises. They have not performed their duty to help developing nations either, since these rely on imports for a large portion of their food needs.

Egypt imports 65 per cent of its basic food needs, a large share of which are grains. The 55 Sub-Saharan African countries import around 30 per cent of their grain needs. Algeria, Iraq and Morocco are among the 20 top importers of wheat. Yet, GTC officials, ignoring the provisions of the convention’s executive bylaws, have showed no flexibility when it comes to offering assistance in the form of grants or loans to countries most harmed by the recent food crisis and the accompanying hyperinflation. The World Bank, by contrast, recently offered Egypt $50 million to bolster its food security in the face of the fallout from the Russia-Ukraine war.

In the light of the foregoing, Egypt felt that it was getting nothing in return for the annual dues it pays as a member of the GTC. The convention no longer seemed to benefit Egypt’s economy or food security. Therefore, in February, Egypt gave notice of its intention to withdraw from the convention. This will come into effect in June, which marks the end of the international agricultural year and coincides with the end of the agricultural winter season and the beginning of the summer season.

The executive director of the GTC said he was surprised by Egypt’s decision to withdraw and that he would do his best to try to persuade Egypt to change its mind. I suspect that GTC officials fear that some other African and Arab states will follow Egypt’s lead, as long as those in charge of implementing the convention remain biased in favour of the West and especially the major wheat and corn exporters, namely the US, Canada, Argentina, France, and Australia.

This bias is also what led Russia to withdraw from the GTC. Russia is the world’s foremost exporter of wheat. Last year, it exported some 60 million tons compared to 22 million from the US.

I believe that Egypt will retract its decision to withdraw from the GTC if its officials show it the appropriate care and attention and consideration for its position as a developing nation and the world’s largest grain importer.


The writer is a professor of land and water resources at Cairo University

* A version of this article appears in print in the 16 March, 2023 edition of Al-Ahram Weekly


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