- ➔ Food and agricultural trade expanded rapidly in the 2000s. The network of food and agricultural trade became denser, with more countries trading with each other and greater participation of low- and middle-income countries. One of the catalysts for this process of globalization was trade liberalization at the multilateral and regional levels. Since the financial crisis in 2008, the globalization process has been stagnant.
- ➔ The structure of the global network of food and agricultural trade became more decentralized between 1995 and 2019. In 1995, a few large trading hubs dominated the trade network. Over time, together with the expansion of trade and the emergence of new players, the number of hubs increased and the dominance of individual hubs weakened.
- ➔ Regionalization of food and agricultural trade – the tendency of countries to trade more within a region than with countries outside the region – has increased between 1995 and 2019. Within the global food and agricultural trade network, countries tend to form particular trade clusters and to trade more within them. These clusters may be regional or they may expand to include countries across regions. They are often shaped by geographic proximity and economic integration fostered by trade agreements.
- ➔ The global network of food and agricultural trade became more balanced. Today, more countries are connected to more trade partners, which can strengthen the buffer capacity and resilience of the network. Nevertheless, only a few countries still account for most of the value traded and only some countries source a large variety of food and agricultural products from many different exporters.
- ➔ The imports of most countries are concentrated on a few products from a limited number of trade partners, making them vulnerable to shocks in exporter markets. To improve their resilience and ensure food security and healthy diets, countries should aim to diversify the products imported and to increase their number of trade partners.
The globalization of food and agricultural trade
Trade connects agrifood systems and people. It plays an important role in providing consumers worldwide with sufficient, diverse and nutritious food, and it generates income and employment for farmers, workers and traders in the entire agricultural and food industry across countries. Since 1995, food and agricultural trade has more than doubled in volume and calories. The use of natural resources for the production and export of food and agricultural products, such as land and water, has also increased.1, 2, 3, 4, 5, 6
In general, trade in goods and services became more important in the world economy and the share of production traded increased rapidly between the first years of the new millennium and 2008. However, this process of globalization, as measured by the share of goods and services exports in world gross domestic product (GDP), came to a halt after the financial crisis in 2008 (Figure 1.1).7, 8
FIGURE 1.1Globalization patterns in goods and services, 1995–2020
Although manufactures are still more intensively traded than food and agricultural products, the globalization in food and agriculture resembles overall globalization patterns.a, 9 The total value of food and agricultural products traded grew strongly between 2000 and 2008, but this trend was abruptly interrupted in 2009 as a result of the financial crisis. Although growth in trade resumed in 2010 and 2011, it has since stagnated (Figure 1.2).b, 10 Trade taking place within food and agricultural global value chains evolved along similar patterns and has remained at 35 percent of the total value since 2008.11
FIGURE 1.2The evolution of global food and agricultural trade, 1995–2020
Globalization, the expansion of food and agricultural trade and the evolution of global value chains were catalysed by a series of trade agreements, at multilateral and regional levels, which reduced tariffs and other trade barriers (Box 1.2). Although trade in manufactures was gradually liberalized after the General Agreement on Tariffs and Trade (GATT) in 1947, it was not until the negotiations of the Uruguay Round (1986–1994) and the subsequent World Trade Organization (WTO) Agreement on Agriculture (AoA) in 1995 that agriculture as a sector was explicitly included in the liberalization process at the multilateral level.12
Food and agricultural products were traded more intensively after 2000, reflecting the implementation period for country-specific commitments under the AoA and China’s accession to the WTO in December 2001.c Emerging economies, such as Brazil and China, have increased their market shares since the early 2000s and play an increasingly important role in global agricultural and food markets.13 The share of global exports originating in low- and middle-income countries increased from around 30 percent in 1995 to 40 percent in 2011, and since then remained constant with high-income countries making up 60 percent of the share of exports (Figure 1.2).d
Declining GDP growth and weak aggregate demand in the aftermath of the financial crisis, together with the stalemate in the WTO negotiations for further liberalization at the global level, contributed to the deceleration of globalization.14, 15
The growth in food and agricultural trade in the first decade of the new millennium was also due to increased connectivity between countries. More countries expanded their participation in global food and agricultural trade and the landscape and geography of trade has changed. The specific patterns in which countries trade with each other give rise to a “network” of trade which reflects the relative position of each country but also important features of the global market. Countries that are connected with many trade partners and trade at a high intensity are located closer to the core of this trade network. Countries with few trade partners and a low trade intensity are located at the network’s periphery. A variety of indicators can be used to analyse the trade network and its evolution (see Box 1.1).e, 16
BOX 1.1Trade network analysis
An increasing number of studies rely on techniques borrowed from network analysis to analyse the patterns of trade flows. Examples include the analysis of integration and regionalization in merchandise trade,59 the analysis of trade networks of various food and agricultural products60, 61, 62 and the analysis of specialization patterns and transmission of shocks in food and agriculture.63, 64
Network analysis comprises a set of techniques that are applied to analyse complex systems. It aims to depict relations among actors, in this case countries, and to analyse the structures that emerge from these relations.65 A multitude of network measures can be used to describe the connectivity patterns of countries, their relative importance within the network, how many other countries they are connected to, how close their relationships with other countries are, or whether they are intermediaries between others.66
Network indicators as used in this report include:
Links: Links represent import or export flows between countries. Links are measured at the country level for aggregate food and agriculture. The number of links indicates the number of countries with which a specific country trades. Box 1.3 also refers to links that are measured by country and product.
Trade intensity: This is the value of import or export flows of a country. The trade intensity measure used in this report is normalized so that it is defined between zero and one. A zero value indicates that a country does not trade at all, and a value of one implies the maximum observed trade intensity.
Connectivity: The higher the connectivity, the more countries are connected directly with each other (direct connectivity) and with countries that are themselves connected to many others (indirect connectivity). Connectivity can be measured by the number of links, or by the value of products that are traded through these links.
Closeness: The closeness index indicates how “close” a country is to all other countries in the network. It is measured by counting the shortest paths, where each short path is defined as the strongest link, that is the link with the highest trade intensity, between two countries. The higher the closeness index, the more central a country is located in the network and the “closer” it is to all other countries.
Hubs: The structure of the trade network in terms of hubs and a core-periphery relationship in this report is determined based on the network indicator known as “betweenness”. Betweenness measures the number of times a country connects to other countries that are not directly connected with each other. High values of this index identify countries that are trade hubs.
Centralization: Centrality measures at country level show the position and relative importance of a country within the global food and agricultural trade network. There are different centrality measures that refer to different aspects of the network. This report uses the centrality with respect to direct and indirect trade links. Averaging individual country centrality indices across countries and comparing over time can give an indication of centralization/decentralization tendencies in the trade network. A decreasing index of centralization can indicate the evolution towards a more even trade network with a high connectivity across countries and decentralized trade structures.
Assortativity: Assortativity describes the extent to which countries in a specific group (for example, countries in the same region, or countries with similar income per capita) trade with each other within the group. The assortativity index ranges from 1 showing that countries within a specific group trade with each other (assortative network) to -1 showing the reverse (disassortative network).
Trade clusters: Groups of countries that trade relatively more intensively within the group and less with countries of other groups.
A more detailed description of the network indicators is provided in Jafari, Y., Engemann, H. & Zimmermann, A. 2022. The evolution of the global structure of food and agricultural trade: Evidence from network analysis. Background paper for The State of Agricultural Commodity Markets 2022. Rome, FAO.
In 2019, a country was 50 percent more likely to form a direct trade link with another country than in 1995 (Figure 1.3 – direct connectivity). The probability that these direct trade partners trade more with other countries also increased (Figure 1.3 – indirect connectivity). These indicators also suggest that the global network of food and agricultural trade evolved mainly between 1995 and 2007, with marginal developments taking place between 2007 and 2019 in line with overall globalization patterns.f
FIGURE 1.3Average connectivity between countries in the global food and agricultural trade network, 1995–2019
Globally, the number of trade links, that is the number of trade flows between countries, increased from around 11 000 in 1995 to more than 17 000 at the end of the second decade of the millennium (Figure 1.4). Over time and leveraging the increasing openness of the global market, low- and middle-income countries increased their connectivity more rapidly than high-income countries, accounting for around 60 percent of global trade links in 2019.
FIGURE 1.4The evolution of food and agricultural trade links, 1995–2019
Looking at the evolution of connectivity in terms of trade intensity – that is in terms of the value of food and agricultural products traded through these trade links – provides additional insight into the global network (Figure 1.5). While many high-income countries and major emerging economies have already been well connected to the global trade network since 1995, most countries around the world increased their trade intensity by 2019. Countries in Eastern Europe and Central Asia experienced an abrupt breakdown of their trade network during and after the dissolution of the former Soviet Union. After 1995, they re-established their trade links and by 2019 they were among the expanding group of most-connected countries globally. In sub-Saharan Africa, some countries continue to remain less connected (Figure 1.5).g
FIGURE 1.5Food and agricultural trade intensity, 1995 and 2019
Between 1995 and 2007, countries moved “closer” to each other by establishing more direct trade links among themselves and by increasing the value traded through these links (Figure 1.6). During this period, both high-income and low- and middle-income countries moved closer to other countries in the global network, thus shortening the paths to these countries. Despite this trend, low- and middle-income countries are still less connected to other countries in the global trade network than high-income countries. This means that on average, as compared to high-income countries, they have formed fewer trade links and the value of food and agricultural products traded through these links is lower.
FIGURE 1.6Average closeness connectivity by country group, 1995–2019
Countries that are relatively more remote in terms of their geographic conditions exhibit even lower levels of connectivity to the global food and agricultural trade network. This is true of the group of Landlocked Developing Countries and Small Island Developing States, for example (Figure 1.6). Countries in sub-Saharan Africa are relatively less connected to other countries in the global network, while, between 2007 and 2019, the group of South-eastern Asian countries shows a strong acceleration in forming trade links and trading more intensively with other countries (see Part 2 for a deepening of the discussion of trade and its drivers in sub-Saharan Africa).