Trade expansion, fueled in part by trade liberalization, is seen by many as a central, if not the main, component of globalization. While this collection takes a broader view of globalization (see Brief 1), the controversial links between trade liberalization and food security, an important dimension of the globalization debate, are discussed here.
Food security has improved over the past four decades. Total food availability in developing countries, measured in daily calories and grams of proteins per capita, was 27 percent higher at the end of the 1990s than in the 1960s, even though the world population almost doubled during that time. The number of malnourished children under five (a better indicator of food problems than average food availability) declined between the 1970s and the mid-1990s by about 37 million, and the incidence of malnutrition dropped from 47 percent to 31 percent.
Other points to be noted are:
- Food availability in developing countries comes mostly from domestic production: imports were about 15 percent of total food production in the 1990s (up from 10 percent in the 1960s and 1970s).
- Food trade, along with stocks, helped reduce the variability of food consumption in developing countries to 1/3 to 1/5 of that of food production.
- The burden of the total food bill (measured by food imports as a percentage of total exports) declined on average for all developing countries from almost 20 percent in the 1960s to about 6 percent currently. This decrease resulted from the expansion of total trade, which has grown faster than food imports, and a decline in real food prices.
- Volatility of agricultural prices in world markets in the last half of the 1990s—since the implementation of the World Trade Organization (WTO) agricultural agreements—does not seem to be higher than for the whole period since the 1960s. It is less clear what has happened to the volatility of agricultural prices within developing countries, because domestic policies come into play.
Although food security has improved in general over the last few decades, there are regions and countries at risk, and some have become more food insecure:
- Average food availability is still low for regions such as Sub-Saharan Africa. And for more than one-fourth of all developing countries, per capita indicators have decreased since the 1960s. In most cases those declines appear to be associated with war.
- The number of malnourished children under the age of five has actually increased in Sub-Saharan Africa, and the incidence of malnutrition is still very high there and in South Asia.
- For the 49 least-developed countries, the total food bill has remained high at 20 percent, and several developing countries with large external debts face additional constraints in financing their food imports.
Industrialized countries. The combination of domestic support, market protection, and export subsidies in industrialized countries has displaced agricultural production and exports from developing countries. This is an especially important issue for the poorer countries, where two-thirds of the population live in rural areas, agriculture generates over one-third of the gross domestic product, and a substantial percentage of exports depend on agriculture. A key concern for developing countries, therefore, is the elimination of subsidies and protectionism in industrialized countries. Against this general proposition, three concerns have been raised.
- First, will the food bill of net importing countries be increased by the liberalization of agricultural policies in industrialized countries?
- Second, for those developing countries that have preferential access to the protected markets of rich countries, will the liberalization of trade in those markets lead to the erosion of trade preferences?
- Finally, will export expansion have harmful effects on poverty and food security?
In the first two cases, a welfare-enhancing approach would be to proceed with the liberalization of markets in rich countries, along with cash grants or other financial schemes to compensate poor countries for higher prices and lost preferences.
The third question is linked to earlier criticisms of the Green Revolution, later extended to commercialization and international trade: first, it is argued, the limited resources of small farmers could prevent them from participating in expanding markets and lead to worsening income distribution. Second, and more worrisome, if relative prices shift against the poor or if the power of already dominant actors (large landowners, big commercial enterprises) is reinforced to allow them to extract income from the poor or to appropriate their assets, the poor could become worse off in absolute terms. It has also been argued that food security could decrease if cash or export production displaces staple crops, and if these changes result in women having less decisionmaking power and fewer resources.
Yet, several studies have shown that the Green Revolution—and domestic and international commercialization—can yield benefits for the poor because of its effect on production, employment, and food prices, although any uniform attainment of benefits is by no means guaranteed. Trade expansion that creates income opportunities for women may also give them greater control over expenditures, with positive impact on child nutrition and development, as well as greater incentives to invest in girls. But there may be a trade-off between income-generating activities and the time allocated for childcare—an issue currently being analyzed at IFPRI. Generally, complementary policies are needed to increase the physical and human capital owned by the poor and by women, to build general infrastructures and services, to ensure that markets operate competitively, and to eliminate institutional, political, and social biases that discriminate against vulnerable groups.
Developing countries. During the current WTO agricultural negotiations (which began in March 2000), several developing countries indicated concerns that further trade liberalization could create problems for their large agricultural populations, among which poverty is concentrated. Poor countries have argued for a slower pace in reducing their tariffs (or maintaining current levels) on the premise that industrialized countries should first eliminate their higher levels of protection and subsidization. Another concern is how to avoid any sudden negative impact on poor producers, whose vulnerable livelihoods may be irreparably damaged by drastic shocks (for instance, by forcing poor families to sell productive assets or to take children from school).
This policy debate reflects a permanent tension between maintaining high prices for producers versus assuring low prices for consumers. While industrialized countries have used transfers from consumers and taxpayers to maintain high prices for producers, developing countries have enforced low agricultural prices to further the process of industrialization. Several studies have shown that poverty alleviation in developing countries was impaired by policies that protected capital-intensive industrialization and discriminated against agriculture. Post-1980s policy reforms in developing countries appear to have reduced general policy biases against agriculture, but in some cases, they may have contributed to the decline of the infrastructure and institutions needed for agricultural production and commercialization. Although further improvements in the general policy framework may still be needed in some countries, now the emphasis should be on investments in the rural economy, focusing on the poor.
Out of concern for small farmers, some have argued that developing countries should move even further towards protection of the agricultural sector. However, considering that poor households may spend as much as 50 percent of their income on food, these recommendations could have a negative impact on the poverty and food security of poor urban households, landless rural workers, and even poor small farmers, who tend to be net buyers of food. Trade protection for food products is equivalent to a regressive implicit tax on food consumption, mostly captured by large agricultural producers, with a greater impact on poor consumers. Also, trade protection for any sector usually implies negative employment and production effects in other sectors, and widespread trade protection leads to a reduction in exports.
The best approach for developing countries is to eliminate biases against the agricultural sector in the general policy framework, and to increase investments in human capital, property rights, management of land and water, technology, infrastructure, nonagricultural rural enterprises, organizations of small farmers, and other forms of expansion of social capital and political participation for the poor and vulnerable. At the same time, developing countries may legitimately insist that industrialized countries reduce first their higher levels of subsidization and protection, and ask for policy instruments to protect the livelihoods of the rural poor from import shocks that could cause irreparable damage.
These issues are currently being discussed in WTO agricultural negotiations. The WTO Agreement on Agriculture (AoA) does not constrain good policies that genuinely address issues of poverty and food security (such as stocks for food security and domestic food aid for populations in need). Under the AoA, countries must make serious efforts to structure well-defined programs for poverty (Article 6.2). Poor producers can also be helped by the disciplines on subsidized exports. Yet, some clarification of the language of the AoA may be required, along with a better definition of country groupings based on objective indicators of food insecurity.
Overall, changes in food security have been positive but uneven, and populations in some developing countries and regions remain seriously at risk. To increase food security requires both reductions of agricultural subsidies in developed countries and funding to support rural development, food security, and rural poverty-alleviation programs in developing countries. Rather than legal constraints to their own policies under the WTO, the main problem facing developing countries in ensuring food security is the lack of financial, human, and institutional resources. This could be addressed by linking agricultural trade negotiations to increased funding by international and bilateral organizations for rural development and poverty alleviation.
For further reading see E. Díaz-Bonilla, M. Thomas, A. Cattaneo, and S. Robinson, Food Security and Trade Negotiations in the World Trade Organization: A Cluster Analysis of Country Groups, Trade and Macroeconomics Discussion Paper 59 (IFPRI, 2000); and L. Smith and L. Haddad, Explaining Child Malnutrition in Developing Countries: A Cross-Country Analysis, IFPRI Research Report 111 (IFPRI, 2000).
Eugenio Díaz-Bonilla (e.diaz-bonilla@cgiar.org) is a research fellow and Marcelle Thomas (m.thomas@cgiar.org) is a research analyst in the Trade and Macroeconomics Division at IFPRI.