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Chapter 6 - The implications for food security


6.1 The agreement and food security
6.2 Assessing the implications of the agreement on food security
6.3 Policy responses in addressing food security
Checklist box for chapter 6


WHAT THIS CHAPTER IS ABOUT

The coming decades will pose increasingly complex issues for national policy makers in developing countries, with food security being paramount among these. The previous chapters have drawn attention to the importance of the food security issue in the wake of the external trading changes that are likely to arise from the Agreement. A common theme in Chapters 4 and 5 was that the impact of the Agreement was going to be most significant for consumers and subsequent consumption policies in net food-importing countries.

In this chapter, we focus specifically on the food security issue. Food security in some countries may be adversely affected and could present formidable challenges for policy makers. The response is likely to encompass further structural changes to these economies in addition to support from the international community.

THE AIMS OF THIS CHAPTER

· To focus our attention upon the food security implications arising from the Agreement.

· To examine the provisions in the Agreement that address food security issues.

· To develop an understanding that there are other factors, and not just the Agreement, that will affect food security.

· To draw attention to some of the policy implications that will arise in addressing food security in the new external trading environment.

WHAT YOU WILL LEARN

· How food Security was addressed in the Agreement.
· The issues that surround the Agreement's provisions for food security.
· The policy responses for food security that arise from the agreement.

6.1 The agreement and food security

The Agreement indirectly addresses food security issues via the Special and Differential measures and, as we have seen throughout the Manual, these are an integral part of the Agreement for developing countries. It allows developing countries more time and smaller reductions in the areas of market access, domestic policies and export subsidies. In addition the de minimis commitment is raised to 10% and there are further exemptions related to input subsidies and export marketing. These were discussed at length in chapters 2 and 3.

The Marrakech Ministerial Meeting foresaw, and acknowledged, these likely negative effects and that the Special and Differential treatment in the Agreement for developing and Least Developed Countries would need to be supplemented with special measures. The important measures adopted at the Marrakech Meeting were:

· The Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least Developed and Net Food importing Countries.

· The Decision on Measures in Favour of the Least Developed Countries.

The Decision on Measures Concerning the Possible Negative Effects of the Reform Programme sets out measures in recognition of the difficulties which may be faced by the Least Developed and net-food importing developing countries during the implementation of the Agreement.

The Decision addresses the issue of food security by:

· Augmenting the provision of food aid by:

reviewing the level of food aid; and
providing increasing amounts under grant terms.

· Promises for full consideration of requests for financial and technical assistance to improve agricultural productivity and infrastructure.

· 'Appropriate provision' for differential terms with respect to export credits.

· Short term assistance in financing normal imports from international financial institutions under existing facilities, or those established in the context of adjustment programmes.

These measures have two principal objectives:

to alleviate the burden on the food import bill and balance of payments;

to enhance the capacity of developing countries in increasing their agricultural production capacity in order to reduce the high dependence on imports.

However, in meeting these objectives the Decisions fall short in providing concrete measures with regard to implementation. The following points have been made with respect to the Decisions:

appropriate guidelines to ensure the availability of adequate basic foodstuffs in grant and concessionary form have yet to be worked out;

the role of international financial institutions in the provision of short term financing of a normal level of commercial food imports;

the mechanisms for increasing and improving the condition of food aid will have to be worked out within the framework of the Food Aid Convention to include the food items which are the most important in meeting specific needs.

Implementation of the Decisions has yet to address:

the definition of beneficiaries and variables to be monitored;
trigger mechanisms for assistance;
nature of assistance;
adequacy of existing mechanisms and terms of access to them.

The Committee on Agriculture will estimate the cost of the negative effects of reforms, and subsequently make recommendations for additional aid. However, the WTO does not have aid funds to directly support such assistance.

6.2 Assessing the implications of the agreement on food security


6.2.1 Influencing the foreign exchange earning capacity
6.2.2 Influencing the price of food imports and market stability
6.2.3 Influencing the availability of food assistance


We have seen that the projections carried out by FAO to the year 2000 forecast a substantial rise in world agricultural trade. However, despite the gains in trade and the ability of the worlds productive capacity to meet effective global demand for food, there will be considerable regional variations, with certain areas receiving no improvement in food security.

Estimates to the year 2020 by the International Food Policy Research Institute (IFPRI) estimate that there will be very little reduction in the number of malnourished children in the developing world as a whole. Whilst in Sub-Saharan Africa and South Asia, the number of malnourished children may actually increase. (Rosegrant 1995)

Food security is defined by FAO to have three dimensions: food supply; access to food; and stability of flows over time. The changes in the external policy environment will influence national food security in three ways.

6.2.1 Influencing the foreign exchange earning capacity

In chapter 4 we saw that the potential foreign exchange earnings could be increased as a result of the improvements in market access, although the effect could be limited in the short to medium term, unless there is an effective supply response. More importantly, as we have discussed in Part II, the response in production will depend upon the overall policy environment in particular developing countries.

Equally important is the focus of the Agreement upon the temperate products of developed countries. Price increases are concentrated on these products. For example, there are likely to be increases in cereal prices: developing countries have a 10% share of cereal exports, alongside a 40% share of world imports. Thus, there is a likely negative impact. The loss in preferential margins will also have a negative effect on foreign exchange earnings in Latin America and Africa.

Overall, the ability of developing countries to make adequate gains via export earnings to meet the increase in food import bills may be limited. Developing countries as a whole are expected to improve their trade balances by some US$ 7.5 billion between the base period and 2000, of which US$ 3.1 billion can be attributed to the Agreement. However, these gains are unlikely to be shared equally: in Sub-Saharan Africa, where per caput food availability is low, the rise in the import bill is unlikely to be offset by gains in other sectors.

6.2.2 Influencing the price of food imports and market stability

The increased project prices in the FAO forecasts point towards an increase in the food import bill. The domestic policy reforms in developed countries will see the reduction in production for major agricultural food commodities, although this reduction in production and consequent upward pressure on food prices will be spread over a number of years during the implementation.

The impact on the food import bill is highlighted in table 7.1. It shows that between 5 and 20% of increases in the food import bill to the year 2000 can be attributed to the Agreement. In the Low-Income Food-Deficit Countries the import bill is projected to rise by US$ 10 billion, of which 14% can be attributed to the impact of the Agreement on world market prices.

6.2.3 Influencing the availability of food assistance

The Decision compensates for the increased food import bill by accommodating the need for greater food aid. The Agreement is unlikely to affect the provision of food aid directly. However, the reduction in export subsidies and other price support in developed countries is likely to reduce the level of cereal stocks which were in many cases used to fulfil food aid requirements.

Table 6.1 Food Import Bills of Developing and Low-Income Food-Deficit Countries, Past and Projected



No. of Countries

Actual (1987-89)

Projected (2000)

Size of Increase

of which: Uruguay Round Effect

US$ billion

World






(%)


All developing

137

40.0

64.7

24.7

3.6

15


LIFD

72

17.8

27.6

9.8

1.4

14

Africa








All developing

52

6.0

10.5

4.5

0.5

11


LIFD

43

3.5

6.3

2.8

0.2

7

Latin America & Caribbean








All developing

46

8.0

12.7

4.7

0.3

6


LIFD

10

1.6

2.4

0.8

0.1

12

Near East








All developing

19

11.5

16.8

5.3

0.8

15


LIFD

6

3.7

4.7

1.0

0.1

10

Far East








All developing

20

14.5

24.7

10.2

2.0

20


LIFD

13

9.0

14.2

5.2

1.0

19

Source: Greenfield and Konandreas, 1995.

Influences will also come from events other than the Agreement. Two critical influences are reform programmes currently taking place in the CAP of the EU; and the transition of formerly centrally planned economies. A successful transition of the latter is likely to mitigate some food price increases as increased supplies arrive on the market.

IFPRI projections to 2020 looked at food projections in the context of different investment and trade scenarios, and therefore included the implications of the Agreement on Agriculture. The global projections of supply and demand of food highlight that the world is at risk of maintaining a two-tiered system of food security, with rich and rapidly growing countries enjoying abundant, affordable food supplies and poor countries suffering from malnutrition and food insecurity. It is argued that national governments need to devise policy responses that address this imbalance through their agricultural and social investment decisions. This would greatly improve food security and reduce malnutrition in developing countries

6.3 Policy responses in addressing food security

A number of policy responses could be devised in conjunction with compensatory, and food aid, support from the international agencies. IFPRI has predicted that the aggregate global supply and demand for food is relatively good if governments and the international community direct policy commitments towards agricultural growth, via cost effective investment in agricultural research, extension, irrigation and water development, human capital and rural infrastructure. These represent the key elements in any policy strategy towards addressing food security in the long run.

We highlight below some more specific polices which policy makers may wish to consider. Some of the policies have been discussed in the context of the preceding chapters but we will highlight them again here.

· There is a need to maintain the transmission of higher price incentives to producers whilst providing support to consumers during the adjustment process. This was the aim of the Decision in the Agreement: to meet short term needs for assistance so that net food importing countries will not have their consumption policies compromised by the liberalisation effects of the Agreement.

· The changes in the terms of trade between cash and food crops may move in favour of the latter: the extent to which a production shift occurs depends on the extent to which prices are transmitted to local producers. Governments may also need, in the short term, to target subsidies to vulnerable consumers.

· The promotion of regional integration and harmonisation of cereal policies, which in the medium term could lead to new sources of supply and greater market development.

· Greater regional co-ordination in addressing food security needs is important and was highlighted in Chapter 6. A collective strategy particularly in Africa would reduce the overall costs of maintaining adequate food reserves, and take advantage of the large common borders between the countries in Sub-Saharan Africa where illegal cross border trade is prevalent.

· Additional food aid, which requires the Decisions of the Uruguay Round transformed into concrete measures.

Checklist box for chapter 6

After reading through this chapter you should be able to make notes on the following key points and issues:

The food security issues that have arisen from the Agreement
The implications of the Agreement on the food import bill.
The broad policies that could address the food security problem in the short and long run.
The implications for food security that have been addressed by the preceding chapters of Part II.


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