Expansion in food trade must support national and global food security objectives, FAO report says
Rome—Rules governing international trade of food and agricultural
products should be crafted with an eye to improving countries' food security
and other development objectives. For this, a pragmatic approach that would
align agricultural and trade policies at the national level is needed, a new
Food and Agriculture Organization (FAO) report argues.
The expected increase in global
trade of farm products along with shifting patterns of trade and multiples
sources of risks to global supplies will give trade and its governance a
heightened influence over the extent and nature of food security everywhere. As
a result, the challenge for policy makers has evolved into one of ensuring that
its expansion "works for, and not against, the elimination of hunger, food
insecurity and malnutrition," according to The State
of Agricultural Commodity Markets (SOCO).
The new edition of this flagship FAO
report aims to reduce the current polarization of views on agricultural trade,
wherein some insist that free trade leads to more available and accessible food
while others, noting the recent bout of volatile food prices, insist on the
need for a more cautious approach to trade, including a variety of safeguards
for developing countries.
Subtitled "Achieving a better
balance between national priorities and the collective good," the SOCO
report emphasizes that the role of trade varies enormously with country
characteristics, such as income, economic and landholding structure, the stage
of agricultural development and the degree of integration of farmers in global
value chains. Amid such variety in country conditions, international rules for
formulating national trade policies should be supportive of efforts to mitigate
disruptions that affect any of the four dimensions of food security:
availability, access, utilization and stability.
Balancing short-run and long-run
objectives is becoming vitally important considering that the nature of
disruptions varies enormously and that market shocks will likely become more
frequent due to geopolitical, weather and policy-induced uncertainties. While
efforts to intervene and shield domestic markets from global price volatility
could in fact lead to increased domestic price volatility, agricultural
incentives play an important role in in boosting agricultural production and
efficiency and fostering broader economic growth.
A decade of dramatic change
The global trade arena has changed notably in the past
decade, with trade in food alone nearly tripling in value terms, driven in
particular by fruits, vegetables, fish, meat and dairy products - all
high-value categories where standards are typically more important than in
staple commodities such as cereal grains.
On top of that, there are changes in
economic geography. Latin America has become the largest net exporter of
food, replacing North America, and ushering in a new political map of
South-South trade flows. Meanwhile, regional trade agreements have
proliferated, and while agricultural commodity imports tend to be dispersed
among many countries, exports are concentrated in a few—such as Brazil with
sugar, or the United States with coarse grains—which makes supply more
vulnerable to sudden disruptions.
At the same time, new and subtler
dynamics are increasingly driving trade patterns, including the emergence of
global value chains and vertical integration within agricultural production and
marketing. Such developments, wherein market power and standardization may
matter as much as price, raise questions about the assumption of competitive
markets and traditional efforts to harness comparative advantages, although
participation in value chains also offer important income-generating
opportunities to smallholder farmers.
The "supermarket
revolution" in many developing countries is also changing the balance of
opportunities and risks. On the one hand, retail chains often procure goods
directly, shaking up habits as shown by the rapid halving of the market share
of the top three banana-trading multinational companies from 70 percent in 2002
to 37 percent today. On the other hand, while supermarkets tend to benefit
lower-income urban consumers, producers may suffer if they lack the ability to
make investments necessary to meet volume, cost, quality and consistency
standards.
Focus on facts and flexibility
The SOCO report offers a nuanced counterpoint to the often
ideological clash between advocates of protected and open markets, which often
stem from differences in the definitions of trade and food security. In
reality, countries may seek to follow different strategies along the policy
continuum from prioritizing own production towards relying on more open markets
at different times in their development trajectory, depending on how their
circumstances change over time.
Moreover, the distinction between
formally protected and liberal markets often fades due to the way trade rules
are actually implemented. For example, while least-developed countries (LDCs)
have reserved the right to apply the highest import tariffs (the so-called
"bound tariff rates"), followed by developing countries, with the
lowest tariffs in developed countries, in reality there is almost no difference
in the tariffs actually applied by the three groups
Appropriate policies often depend on
the extent to which national markets are developed and behave competitively and
offer participants tools to manage risk. Where these conditions do not yet
apply, "domestic support policies should not be rejected out of
hand," SOCO argues.
Mainstreaming food security—itself a
function of multiple sectors of economies that change over time—into the trade
policy decision-making process is a way to make trade an "enabler" of
sustainable development and the core goal of eradicating hunger.
Fresh produce for sale at a street
market in Giza, Egypt. (FAO)
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