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STOCKHOLM, SWEDEN The Impact of Globalization and Trade Liberalization on Food Security |
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It is important to clarify the terms globalisation and trade liberalisation before addressing their implications for food security, particularly of the most vulnerable people globally -- that is, the poor and the undernourished. Globalisation is a broad concept. It refers to the increased international mobility of goods, services, money and finance, information, people and ideas. For example, in Stockholm it is possible to buy fresh tropical fruits grown half way around the world, or many other products manufactured on distant continents. The restaurant where some of you may have had lunch today may very well be part of an international chain such as McDonalds; local portfolio investors can buy and sell shares of foreign companies on stock exchanges in distant countries; airport statistics confirm the unprecedented movement of people; and 24-hour global TV coverage and the internet ensure that there is now almost instant transmission of information and ideas. This increased mobility has been made possible by technology and trade liberalization.
The processes of globalisation and trade liberalization present both opportunities and challenges in the agricultural sector.
The agricultural sector lies at the centre of the developing countries' economies. It accounts for:
The agricultural sector and the related rural sectors also provide the source of livelihood for 60-70 percent of these countries' poor.
Thus, any impact of globalisation and trade liberalization on the agricultural sector of these countries will have far reaching implications for the livelihoods of their populations.
Agriculture of developing countries is also essential to world agricultural trade, however, with enormous differences:
The agricultural trade balance shows a widening deficit, which reflects a growing food import dependence. Moreover, there is a deterioration in the ratio of total food imports to total agricultural export, i.e. food imports are rising faster that agricultural exports, by three percent for LDCs and by five percent for other developing countries. The trends for both the LDCs and NFIDCs raise the question of their ability to pay for their growing food import bills. The ability to finance these growing imports depends on a number of factors, the most important in many cases being the export earnings and external resource inflows. In most of these countries, export earnings have stagnated over the last two decades, mainly because of the fall in commodity prices. The foreign debt burden has also limited the ability of many LDCs to import. Countries with particular tight foreign exchange situations include those such as Haiti or Rwanda. Obviously, being economies with little other resources than agriculture, these countries need to concentrate on making their agriculture more competitive, and this in two directions:
Several WTO agreements are directly related to the agricultural sector. However, my subsequent remarks will focus more on the Agreement on Agriculture (AoA). The AoA provides for commitments to reduce domestic support, and export subsidies, and increase market access. The SPS and TBT allow trade barriers under well defined conditions, in particular science based standards to protect human, plant and animal health, and adherence to technical norms and labelling requirements TRIPS expects all WTO member countries to have systems in place which protect the property rights of investors. It explicitly calls for property rights for plant varieties, including so-called sui-generis systems. Experience to date: Despite progress achieved in the implementation of these agreements, the international trading system remains unbalanced. Moreover the complexity of import regimes and of accessing tariff rate quotas as well as the costs of complying with standards continue to create obstacles The WTO negotiations for continuing the reform process were launched in February 2000 and are now well-advanced. Developing countries are actively involved in the negotiations and FAO assists them through information, training and special analyses. At the outset: any market economy that wants technical and institutional progress is bound to have winners and losers! The basic philosophy: as long as the net gain is positive for the entire economy, the losers can be compensated or assisted to adapt to the new conditions. The founders of the WTO, in Marrakech, recognised this need and devised special and differential treatment and special asistance to those countries expected to be negatively affected (NFIDCs and LDCs, due to higher import prices) Unfortunately, this assistance has mostly not been implemented Winners and losers are affected via various mechanisms. The underlying facors include whether or not countries have effective infrastructure and technologies, market-friendly legislation etc.These then work through the following mechanisms:
After six years of implementation, the experience with the WTO Agriculture on Agreement has been mixed: The Agreement has contributed to the re-instrumentation of trade and agriculture policies, however, actual changes in the levels protection have not had a tangible impact on global trade and incomes. In most countries, agricultural import barriers are still much higher than in the industrial sector. OECD countries continue to provide support and protection to their agricultural sector at the rate of $325 billion per year. This is higher than before the Uruguay Round and it exceeds the combined GDP of the developing countries of sub-Saharan Africa. Export subsidies continue to depress world agricultural markets. Agricultural tariffs remain high, especially for horticultural products, sugar, cereals, dairy products and meat, and tariff escalation continues to give particular protection to processed foods, notably the value-added forms of coffee, cocoa and oilseeds in importing countries. As tariffs are being reduced, at least gradually, and are already low for many tropical products, developing countries are increasingly worried about stricter and stricter standards under the SPS and TBT Agreements The volume and value of export products from developing countries rejected at the borders of the USA, the EU and Japan is enormous. The slide shows the reasons in the case of the USA. This leads to the following comments: As prescribed by the SPS Agreement, the standards must be, and mostly are, derived from strictly science-based risk assessments, hard to appeal As members of the standard setting intergovernmental bodies (Codex, IPPC, OIE), the developing should participate actively in risk assessment and standard setting, however they don't To participate more competently and actively requires capacity building in developing countries for monitoring, risk assessment and regulation in the entire area of bio-security throughout the food chain. Donors are needed to help in this capacity building Food safety, and other aspects of bio-security cannot remain the luxory of the rich! Two reasons for developing to increase competiveness of domestic agriculture
Priority areas for investment
A basic handicap: while the lifting of trade barriers by the developing countries has quickly led to rising imports, even at higher prices, their own agriculture has often not been able to respond to the new opportunities through invetsment and production growth. FAO has undertaken several analyses of the impact of the Uruguay Round Agreements (URA) on agricultural markets and a number of country case studies on national experiences with the implementation of the UR Agreements, changes in trade flows and other effects. The broad conclusions are that the sharp rise in prices of many products during 1995 and 1996 was due mainly to supply "shocks" and to the ensuing draw-down of stocks. This latter occurrence was in part influenced by the gradual reduction of government intervention in agricultural commodity markets following the UR Agreement on Agriculture - especially for cereals, meat and dairy products where protection and support levels were high. In any case, there was a sharp spike in food prices in the mid 1990s and and a corresponding rise in the food import bills of LDCs and NFIDCs. Whereas prices have come down since, nevertheless, as the chart shows the cereal import bills of these countries are now on a higher plateau. An encouraging note: There seems to be wide consensus that the new WTO round should lead to a drastic reduction of export subsidies as well as of export creditsreduction of export subsidies However, the NFIDCs may still need help to adjust to the new conditions. Domestic support to agriculture still substantial in OECD countries (Total transfers estimated at $325 billion in 2000, almost US$ 20000 per full time farm worker) On the other side low domestic support in developing countries. Problems faced by the developing countries:
SDT is built into almost all WTO agreements, in the form of
Marrakech Decision on Measures concerning the Possible Negative Effects of the Reform Process on LDCs and NFIDCs
Experience to date with both mechanisms: Compensation, and special and differential treatment - just hasn't been implemented partly In general, food aid to developing countries has been declining since the early 1980s, with sharp falls during 1995-96 to 1997-98. The main paradox is that food aid declines at the time when it is needed the most - when world food prices increase food aid declines. The ratio of food aid to total imports in LDCs fell from 64% in the mid-1980s to 34% in 93/94 to 21% in 98/99. For NFIDCs the reduction was even greater falling from 22% to 2%. According to the FAO estimate a revolving fund of US$ 1.2 - 2 million could provide a sustainable facility for assisting LDCs and NFIDCs to deal with food import surges. An example is a proposal of a Revolving Fund, proposed by a group of developing countries, which aims at improving the operational effectiveness of the Marrakesh Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on LDCs and NFIDCs. This Decision has so far not been implemented. The proposal of the Revolving Fund of 1.2 billion US$ has two components: - short term financing at concessional terms available to the NFIDCs and LDCs in times of high world market prices and
At the request of members of the WTO Committee on Agriculture FAO is providing analyses to clarify the practicality of this proposal. In the efforts to alleviate food insecurity and poverty, trade liberalization should not: overwhelm the ability of people and countries to cope with the pace and patterns of change, diminish economic and social diversity, or detract from the main focus of development: people - not markets. The spread and momentum of globalisation seem to overwhelm some people and countries who are not able to cope or compete, at least not rapidly. There is now a growing recognition that the process needs to be better managed from a perspective of global governance. Whereas globalisation in the economic sphere is an increasing reality, the development of a global society with rules and mechanism similar to those found at the national level to ensure fairness, solidarity, safety nets or an equitable distribution of benefits, seems to lag behind. It is because of this that there has been a growing debate, more at the international level than at the national level, on the subject of winners and losers from globalization. Conclusions: - There is an uneven distribution of benefits between countries and peoples
Multilateral trade rules should be made more supportive of agricultural development and food security Investment is needed to enhance productivity and competitiveness of developing countries' agriculture Ethical claim: "A global society, rather than a global economy" Despite progress achieved in the Uruguay Round Agreement on Agriculture, the international trading system remains unbalanced. OECD countries continue to provide support and protection to their agricultural sector at the rate of $325 billion per year. This is higher than before the Uruguay Round and it exceeds the combined GDP of the developing countries of sub-Saharan Africa. Market access barriers remain much higher for agricultural goods than for industrial goods. The negotiations for continuing the reform process were launched in February 2000 and are now well-advanced. Developing countries are actively involved in the negotiations and FAO assists them through information, training and special analyses. An example is a proposal of a Revolving Fund, proposed by a group of developing countries, which aims at improving the operational effectiveness of the Marrakesh Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on LDCs and NFIDCs. This Decision has so far not been implemented. The proposal of the Revolving Fund of 1.2 billion US$ has two components: - short term financing at concessional terms available to the NFIDCs and LDCs in times of high world market prices
At the request of members of the WTO Committee on Agriculture, FAO is providing analyses to clarify the practicality of this proposal. |
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