fao statistical yearbook 2004 cd rom pptx

Poverty impacts of agricultural ade reforms ‘aicultures oie in poverty reduction ‘ead ole in poverty reduction ‘agyicultural rade reform and poverty impact of trade reforms on factor mat

‘Photos on page 3: Alster ar om 520 Mabie

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1 Intrndudion and aeniesr

“Trade, poverty and food security: what are the linkages?

Ouerview ofthe report

2 Trends and paters in international agricultural trade

Aariultura rade and the word econom

biting gesgranhy sỉ xoicuitưai bai

Aatiuhiual tadein he lau develoged counties

aticultsal ade wha eslen

Processed products and the role of supermarkets

Key findings

3 The-ariultural wade pole landscape

voltion of earcutural ade ply

Domestic support

Aadetacces

Key finding

44 Macroeconomic impacts of saricutural trade reform

Modeling trade plc efor

Computable general equilbyium model ruts

‘Aariculture actor model sults

Kevfindinas

' Poverty impacts of agricultural ade reforms

‘aicultures oie in poverty reduction

‘ead ole in poverty reduction

‘agyicultural rade reform and poverty

impact of trade reforms on factor matkets

Sad reforms productivity and economic arovth

inpleations fr policy ezearch

Kev findings

6, ‘ade and food security

Whats food security”

Correlations between trade and hunger

“rae liberalization and food security

‘jse-sucies in macosconomic and wade rfoems

Kev findings

7 Making trade work forthe poor: the twin track approach to hunger

and poverty reduction

“rack one: creating opportunites

Traketwo: ensuing ceo

‘Are we on the ight oath?

Pact

World and regional review: facts and figures

=—

22 Food emergencies and food aid

3 Eternal aestance to agriculture

#4Crop and lvestork production

Intemational commodity pie trende

Statistical annex

Table Al Countries ang terior ied for satitial purposes nthe publeation 148 Table A2 Food security and nutrition 150 Table A2Aqicultural production and produc 158 Table-Ad Population ang labour fore indicators 138

SPECIAL CONTRIBUTION

Can trade work for the poor? A view from cv society

‘ABLES

1L_Destinstion of saricutural exports by reaion

‘Gricin of sricultural imports by recion

$2 OFCD producer supoort estimate

| Measures of domestic support

5-County- level saricultra tari data, 2000-02

{5 Welfare gains from CGE studies of trade liberalization

2 Bilateral ade: percentage change in value of bateral import volumes

Effects of trade liberalization on undklled wages by sector and scenario

‘9 impacts of policy reform on world commodity pices

10 Food and hunger indicators by region

11, Average applied and bound MEN tris

12, Ratio of total value of food imports o total value of agricultural exports

Tà Changesin the proportion ofthe population undernourished

ood production, rural poverty and economic growth “

14, Per capita avalability of calories and protein, 1980/82-1990/201 s

16 er capita shipments of fod ai in cereals 20

#HĐEEEE

aoxrs

1._Wwnat other multaterl agencies conclude about wade and development di Main prowsions ofthe Uruguay Round Agreement on Agriculture x

‘Te European Union's aif quota regime for dary products n

Key features of computable general equilorium models 30 What do we know about poverty reduction? H

Impact of agricultural iberlizaton on poverty in Braz 0 Why erade matters for reducing poverty and improving food security 16 10._Cashew market liberalization in Mozambiaue as

TH, Bresking the cyl of hunger and poverty a twin track strategy

reduce hunger and paver,

5 Share of developing countries im agricultural and total merchandise rade 1%

6 _Aaricuturl trade in developed and developing countries rs 1.Ratio of trade to GOP in developed and developing countieg i Agricultural fade in the developing country regions 18 Agricultural tade inthe ait developed counires 20 {i Ratio of trade to GDP inthe lest developed counts 30 12._Shate of processed products in agricultural expats 2

12 Subsidized exports as share of total €U exports of elated produc 1995-2001 24

14 Tan escalation fr fibres textiles and othing 2

15, Agtcutural GOP and undermourshment, 1998-2002 rs T6 Ateuhuralemplovment and undarnoursbrrent 1238-3802 2

17._Agreuturl trade and undemourshment, 1998-2002, 6

18 Agreutural exports and undeenourihment, 1958-2002 sẽ

TC Areuturs mperk and undemaurohmrento 1890-2005 &

20 Food imports and undernourishment, 1998-2002 s

221 Integration of agriculture into world markets and underneurihment, 1598-2007 65

22 Regional impact of trade liberalization in Mexico 8

23 Intial impact of WTO aecesion on rural and urban Rovsehold real income

lam CC

24_Impact of MERCOSUR on household rel income in Argentina 3

15 Impact of trade liberalization on hoveshold real income in Mexia 3

26 Conceptual framework for fod insecurity a

27 Percentage undernourished plotted agains ratio of agricultural Wade

2_ Percentage unger weight ploted again rato of aqrieulural rade

29,_Refown=cespores-reault framework a

430, Evolution of real dometic prices andthe real fleive exchange rte inhi 90

31 Evolution of real domestic prices and the real effective exchange rate in Ghana 91

|32_ Change in avecage food availabilty vs change in underutiton prevalence

38 Aqriutural capital stock per agricultural worker in developing counties

‘by prevalence of undernourshment in 2000-2002 108 :24_Aavicultural entation of public investment 105

35 Long-term trend in external stance to agriculture, 1574-2002 105

“SẮC Esteral stance to ariulture per agricultural worker by prevalenes of

.32,_Undernourished population by region, 2000-02 ng 38._rend in number of undernourished in developing counties by region ng 8C Trend in percentage of undernourished in developing counties, by gion HỆ

0 Recipents of food ad in cereals mg đ3L_ RecglentoeEfosd am non renr 121 '22_Commitments of extemal asistance to agriculture, by main recipient regions 122

43 External aeistance to agriculture pet agrcutural worker 12

‘#4 Changes in cop and livestock production 124

|35_Long term trend in per capita food production by region and country group 125

£45 Wierld cereal production and utilization HÀ

‘41 Wield cael sachs and tock utiation zag 2 '48 Commoshity price wands 128

9 Aneua changela vlue Sĩ218BAL 230v exports 130,

50 Global agricultural exports 13

“Agrcaltural impos and expan, by region 13 52._World fih production, China and rest of the wor 1s

Tả Tiade in fish and fish products, developed and developing counties rr

5 Net exoort of fish and ih products and lected agrcutural commode

Sẽ, World roundwood production HH

56 Production, consumption, impor and sxoorx sfIndtstralrunshzaodiin2002 — 138

57 Roundwood preducton, developed and developing counties 138 58._Value of wade in forest products 138

58 Indusval roundweod production by region, 2003 140

Foreword

The state of Food and Agriculture 2005

‘examines the linkages among agriculture,

trade and poverty and asks whether

international agricultural ade, and its

further reform, can help overcome extreme

poverty and hunge “The global statisti on poverty and

hunger are all 00 familar An estimated

1.2bilion people lve on les than one

dollara day and FAO's most recent estimates

Indicate that 852 milion people lack

suficient food for an active and healthy We,

‘There is now alo.an increased awareness

that extreme poverty and hunger ae largely

rural phenomena, Most ofthe word's poor

and hungry people liven ural areas and

depend on agriculture fr thet livelihoods

othe extent that agriculture is affected

by trade, trade will necesalyafect the lvelinoods and food security ofthe world’s

‘most wuinerable people

‘The global econamy is becoming

increasingly integrated through wade, nd

‘2griculture is part af this larger tend For

Some countries agricultural trade expansion

“parked by agricultural and trade policy

‘reform - has contributed toa period of

rapid pro-poor economic growth Indeed,

Some ofthe countries that have been most

Successful in reducing hunger and extreme

‘poverty have relied on trade in agricultural

products either exparts or imports or both,

san extetial element of ther development

eaten,

‘Many of the poorest counties however,

have not had the same pave experience

Rather they ate becoming more

marginalized and vulnerable, depending on

Imports fo a sing share of thee food need

Without being able to expand and aiversity

ther agricultural or non agricltural exports,

FAO believes thatthe reform process under

way must consider the specie circumstances

ofthese counties, particulary thee stage

‘of agricultural development andthe

‘complementary polices needed to ensure

‘heir successful integration into global

agicutural markets

Ao has ong recognized that agricultural wade is vita or food security, poverty alleviation ane economic growth, Food imports area fundamental means of supplementing local production in ensuring the provision of minimum supplies of basic foodstuffs many counties Agricultural

‘exports are an important source of foreign

‘exchange earings and rural income in

‘many developing countries Reducing trade distorting agreutural subsidies and borrerto agricultural trade can seve ae catalyst for gronth a producers worldwide could then compete on the basis of their Comparative acvantage,

However intermational trade in agrcutural products is characterized by numberof problems that do not allow Competition on the bass of comparative advantage The markets fr many temperate-zone products and basic food

“ommodites ae substantially distorted

by government subsidies and protection, particularly in Organisation for Economic

‘Co-operation and Development (OECD) countries Some developed countries

‘continue to subse thelr farmers and, where this leads to market surpluses,

‘ven their agricultural exports For ether agricultural products, particularly tropical

‘ones such as coffee, tea, natural fibres,

oi fruits and vegetables, the problems include high as well 5 complex and seasonal tariffs and significant arf escalation These market distortions tend to lower world market prices for basic fooastutls

‘nd limit market acces This has helped net food-importing low-income countries

fa keep their food import bils lo, but has also sent vrong signals tothe

‘governments of developing counties that have sometimes misled them to neglect

‘their ovn agriculture, Low pices and lack

of investment have hindered agricultral

‘and ural development in poor counties inthis context it must be emphasized tho it isin the developed counties interests that developing countries gow faster, not east

because such growth would increase the

sizeof markets for developed country

ron-agrcutural exports

The developing countries too have

important decisions to make, Some

Geveloping country exporters would benefit,

from the liberalization of OECD agricultural

polices, but benefits for developing

Countries ae als expected to result from

Hiveralization of trade among them, Indeed,

‘many benefits fom global agricultural

{rade liberalization for developing counties,

would be the result of ther ow policy

Feforms South-South agriultra rade

is expanding rapialy asincomes rise, cites

{gr0W and lifestyles site towards more

tiverse Gets These are the growth markets

ofthe fre

should be noted, however, that some

developing courtries may not pain tom

further ageeuturl trade liberalization

Some counties tht depend on preferential

access to protected OECD markets for

‘hie agrcltural exports would lose if

those preferences were eroded Net food

Importing countries would aso be harmed,

especially inthe shart run, náo far asthe

Femoval f OECD subsidies would ead to

higher prices of basic foodstuts on world

rmorkets

Although there seems tobe broad

‘consensus that rade liberalization fosters

ficiency and economic gronth, the

immediate results forthe por ad food:

ineacure seem to be mised n the present

situation of distorted agricultural commodity

markets Experience shows that gains and

losses and the ditriution of winners and

losers among individuals and countries are

determined by context In practice, 2 great

deal seems to depend onthe existence

of complementary factors international

trade and trade liberalization can best

Promote sustainable reductions in hunger

nd poverty if appropriate complementary

measures are putin place

“These measures include, on the ane hand,

Investments that would enable people

to take advantage ofthe opportunities

presented by rade and, onthe other

hang soca safety nets to ensure thatthe

weakest and most vuinerable members of

Seciety are protected from the potential

lsruption that aise from tad reform

‘We must alnays pay particular attention tothe specific dificuties faced by the leart-ceveloped countries, the lov income food deficit tountie and ether valnerable groups ‘Among the most important ofthese investments are measures such at reducing the large variations in agrcutural

production in rain-dependent areas through small-scale water projects implemented a the village and community levels improving rurl roads so that inputs

‘can mote easly reach the producers and production the markets and improving

ll components of the marketing chain, Especially needed are better storage and packaging facites at the farm level and Throughout the marketing proces, a well

at market faites, slaughterhouses and ort Equally important investment in

‘Capacity building to enable counties to comply with quality and safety standards {nd with the World rade Organization

‘Agreements on Sanitary and Phytosanitary Measures and Technical Barriers 0

“rade; this includes the provision of kills training, equipment and resources, and strengthening of institutions to facitate Countries active participation in standard setting bodies

‘Such investment in agriculture and sol areas nat multiple payots, not the least of which isthe increated capacity (of developing countries to become more effective participants inthe international

‘economy With proper assistance from

‘wealthier counties, rae standards can be transformed from a threat tan

‘pportunity FAO's ongoing studies and analyses do provide encouraging lessons and overall, policy guidance, Among these many limportant lessons the need for policy

‘makers to consider more careful than they hove in the past how trade policies can be sed positively to promote pro-poor growth,

‘his involves atively implementing polices and making investments that complement trade reforms to enable the poor to take advantage of trade-related opportunities,

‘while establishing safety nets to protect

‘ulnerable members of society

‘The Millennium Declaration underscores

‘the importance of international rade in the

‘context of development andthe elimination

fof poverty n the Millennium Declaration,

‘governments committed themselves, inter

‘aia, tothe cretion of an open, equitable,

‘ule-based and non-scriminatory

‘multilateral vading system uch asystem is

‘essential if international agriultra trade isto promote mare equitable economic

‘growth and contribute to the goals of

‘Poverty alleviation and food security

Jacques Bout FAO DIRECTOR-GENERAL

Acknowledgements

The State of Food and Agrcuture it

prepare by FAO's Agricultural and

Development Economics Division The team

ised by Terr Raney, Senior Economist and

Eclitor and includes André Croppencted,

Annelies Deus, Jakob Skoet and Slobodanka

Teodosevic Stella di Lorenzo and Paola di

Santo provide secretarial and administrative

Support Randy Stringer, Chet, Comparative

Agvieultural Development Service, and

Prabhu Pngal Director Agricultural and

Development concmies Division, provide

overall supervision and guidance

Part, "Agricultural trade and poverty,

can trade work forthe poor?" was prepared

Under the direction of Joe Franco, Randy

Stinger and Alexander Sars Numerous

people from several FAO techaical unis,

in particular the Commodities and Trade

Dision, a well a ther international

organizations and independent experts

provided helpful advice, asstance and

Suidance, The key background research for

Part is based on work by Joe Francis, Tom

Hertel, Philip Kilicot, Mares warie Wail

‘Martin, Randy Stringer, Jacob Skoet rank

van Tongeren and Wang Zhi The report

benefited greatly from erica comments

analytical eviews and substantive editing

by Kym Anderson, ele Sruinima, Walker

Falcon, Hartwig de Haen, Tim Joling, Jamie

erlson Prabhu Pingali, Ramesh Sharma

ane Alberto Valdes, Coleagues in FRO

Statistics Division provides data and related

statistical inputs

(Chapter I {introduction and overview)

Draft text wa provided by Joe Francois, Tim

Josling, Terr Raney and Randy Stinger

Chapter 2 Trends and patterns im

International agricultural trade) Text wos

prepared by Annelies Duss, Jacob Skoet and

Randy stringer

‘Chapter 3 (The agricltural rade policy

landscape) Contributors include toe

Francois, Tim Josing, Will Martin, Jakob

Skoet, Frank van Tongeren and Wang 2h

‘Chapter 4 (Macroeconomic impacte of

sgriultural trade reform, This chapter

‘Sid on 9 background paper prepared by

Joe Franco and Frank van Tongeren Tom Hertel, Teri Raney and Jakob Skoet provided additional contributions

‘Chapter 5 (Poverty impact of agricultural trade reforms) This chapter i based on a background paper prepared by Tom Hertel and Maras vanie Addtional inputs were provided by Randy Stringer ang Alberto Valaes

‘Chapter 6 (Trade an food security) Prilip Kilicoat, Annelies Deus, Teri Raney

‘and Jakob skoet prepared this chapter,

‘hich s based in large parton research by the FAO Commodities and Trade Division,

‘his esearch was presented tothe FAO Commitee on Commodity Problems in May

2005 n the document Food securty in the

‘context ofthe context af economic and trade poy reforms: sights from country

‘experiences (CCP 0511)

‘Chapter? (Making trade work forthe oor the twin tack approach te hunger and poverty reduction This concluding chapter

‘was prepared by Annelies Deus Philip Killacoa, Prabhu Pingal, Teri Raney, Randy

‘tinge and fakobSkoet Par, “World and regional review:

facts and figures", was prepared by André Croppenstect, Annelies Deuss and lakob Skoet

Part "Statistical annex”, was prepared

by André Croppenstest, Anolis Deuss and Terr Raney

“The team i particlaly grateful othe State of Food and Agrcuture External

‘Adwsry Board, comprising Walter Falcon (Chain, Bina Agarwal, Kym Anderson, Simeon Ehu, Fant Heidhues and Evgenia

"Much, who provided valuable guidance fon the scope and fous ofthe report

“The report benefited from the work of the eultors, designers and layout artists ofthe FAO Publishing Management Service

‘Common Agricultural Policy

‘computable genera equilibrium society organization

«coefficient of variation

‘external atitance to agriculture United States Environmental Protection Agency European Union|

‘equivalent variation {foreign direct investment General Agreement on Taifs and Trade ross domestic product

Global Trade Analysis Project International Monetary Fund ternational NGOICSO Planning Committee for Food Soversignty least developed country

Millenium Development Goal most favoured nation

et foodimporting developing country on-goveramental organization antaif baie

‘Organisation for Economic Cooperation and Development purchasing power parity

nm ne soma

a2a3aa

VNCLOS VNCTAO

Poverty Reduction Strategy Paper

producer support estimate Roles of Agriculture Reseach Project (FAO) special safeguard (mechanism)

state trading enterprise

‘ari rate quota United Nations Convention onthe Lv of the Sea United Nations Conference on Trade and Development United Nations Development Programme

United states Department of Agriculture

‘World Trade Organization

Sách có ban quyền

Explanatory note

‘The statistical information in this ie of

The State of Food and Agriculture has been

prepared from information avaiable to FAD

úp to November 205,

symbols

‘The following symbols ae used = = none or negligible Gn tables)

rot available in tables)

§ = Us dollars

Dates and units

‘The following forms ae used to denote years

‘or groups of years

2003/08 = 2 crop, marketing or fiscal year

running from one calendar year

tothe next,

‘the average forthe wo calendar

years

Unies others indicated, the metric system

Is used in this publication

"000 milion

Figures in statistical tables may nat adel up

because of rounding Annual changes and

rates of change have been caleulated rom

Urounded figures

Production indices

‘The FAO indices of agricultural production

how the relative lovel ofthe aggregate

volume of agricultural production for each

yearn comparison with the bate perog 1989-91 They are based onthe sum of pie

‘weighted quantities of diferent agricultural

ommorstes afer the quantities uted 38

seed and fee (silly weightes) have been

deducted The resuting aggregate therefore

represents disposable production for any use

except sed and fed

all the indices, whether a the county,

regional or worl level, re calculated by the

Lspeyres formula Production quantities of

each commodity are weighted by 1989-91

fverage international commodity prices and

Summees foreach year Te obtain the nda,

the aggregate for given yearis divided by the average aggregate forthe base period 1965-93,

Trade indices The indies of trade in agricultural products

te leo based onthe bate period 1989-91 They include all the comenedtues and Countries shown inthe FAO Trade Yearbook Indices of total feod products include thove edible products general asied as

a Allindlces represent changes in curtent values of exports fee on board to.) and imports (cos, insurance, freight cD, teapressed in US dolar When countries report imports valued at 0.6, these are adjusted to approximate ci values Volumes and unit value indies represent the changes inthe price-weighted sum of

‘quantities and of the quantity weighted Unit values of products traded between Countries The weights are, respectively the price and quantity averages of 1989

‘1 which eth bave reference pariog used forall the index umber series curenty

‘computed by FAO The Laspeyres formula is {eed to construct the index numbers

mela

1 Introduction and overview

‘The debate over the role of trade in ‘They claim, moreover that agricultural

economic growth and poverty reduction has imparts from developed countries undermine

3 long history, This often contentious debate the economic and socal fabric of poor rural

dates back more than 50 years at FAO and afeas, stalling the waditional engine of

Ties at the very root of economics {growin inapfarian societies Tel fears

[Advocates of frer trade argue that trade that the more the developing counties open

promates growth and that growth reduces thelr borders, the more they expose poor

Dover Ths vew maintains that trade food consumers to pice shocks and small

Daties suchas impor tarts and subsidies food producers to sks and incentives,

‘generally benefit a powerful protected few Pointing to the existing international

St the expense ofthe many Reducing trade ‘raging system for agriculture, many

barriers promotes more efficient resource cite the import barriers, export

se Subsidies and domestic support retained

‘Greater efficiency means that societies by some industrial countries in spite of

‘an produce more af the things people recent progress under the World Trade

‘want, within ther limited resources raising Organization (WTO) Agreement on

‘overall socal welfare The poor are able to Agriculture They question how farmers in

improve thei levels of ntition, health and developing countries can compete when

‘education creating a vitvous ciceof thing thelr governments had already agreed

roducity and poverty eduction to rade and agricultural pole changes

‘rites of freer trade argue that this promoted by the World Bank and the

sneoclasical” model is flawed and that International Monetary Fund (MF) under

infos to account adequately for market structural adjustment programmes

impertections and for inequitable power ‘Advocates of agricultural rade

relations that govern the multilateral trade liberalization argu, on the other hand that

negotiation process Trade liberalization th vew soo pesimisti and onesided, and

‘damages fod security, they argue, Because that the adjustments assoaated with poy,

Tiberalization benefits only the larger and reform are temporary andthe efficiency

more export-oriented farmers, leads to gins rom Wade outweigh these transitory

teal incentives andsize concentration, _ costs They claim that trade barriers ae 9

‘marginaizes smal farmers and creates cortyandinetfectve vay of supporting

Unemployment and poverty ‘ood security and agricltural development

Cis also maintala that ade in poor counties Rather, productivity

Iberaization holds no guarantee that enhancing investments in markt instittions

‘everyone wll benefit, even nthe long run, _infastructure, technology and human capital

‘arguing that in realty it the poorest and represen a etter strategy for pro-poor

aulnerable members of society who suffer growth

‘most from the market diuptions arising Whe recognizing the imperfect nature of

fom the reform proces, the WTO wade reform process supporters

4

80X1 What other multilateral agencies conclude about trade and development Four Fecent reports on trade and

development highlight the importance the international community places on the promise of trade in common with The State of Food and ageculture 2005, these other UN agencies al cl for (an end to OECD countries supporting their agriculture sectors in ways that harm developing countries: (i) more effective lproaches to the sks caused by negative Commodity rice shocks, i) more

effective market aces or developing

‘Countries and (i) enhanced South-south Cooperation in the fel of ade and Each agency arived at the commen concisions presented above even

‘though they focused on afferent trade and development related themes For

‘example, the WTO World Trade Report

2004 examines the impact of domestic policies on trade, arguing that the benefits from good trade policy may

be undermined if governments do not also pursue appropriate domestic sector

“pede policies, While trade policy an have a postive impacton a country’s argue thatthe situation for developing

‘Countries could have Been much worse

‘without the dicptines af the Agreement

‘on Agriculture They point to the "subsidy

‘wars ofthe mic: 1960s that generated huge Surplus stocks in Europe and North America, severely depressing and destabilizing

‘label commodity prices WTO disciplines helped reduce tase excesses and may have prevented far worse ‘They maintain thatthe structural

adjustment programmes implemented by

‘many developing counties inthe 19805

‘and 19905 were essential in order to correct unsustainable budget dels and owenalued

‘urrences To the extent that đưụctưi fcjutment reforms have actually been Implemented and the experts are dided

‘Shorply on this question the severe “urban bias" that penalized agriuture in many developing counties has been reduced

Te took $0 years af successive multilateral

‘wade negotiation to bring down tari

‘growth and development prospects the {WTO report steses the Importance of

‘ensuring coherence in pai formulation, pointing out that inconsistencies in policy Stances or neglect in particular areas can diminish valuable vading opportunities, UNCTAD’ Least Developed Countries

‘Report or 2004 azeees the relationship between Intemational trade and poverty

‘vithin the least developed countries (LDCS) concluding that international wade has not fulfilled is major potential olen poverty reduction in LDCs Reasons include

‘weak trade performance, weaker linkages between trade and economic grovth than inthe more advanced developing counties and tendency for export expansion in very poor economies to be sociated with an exclusionary rather than inclsive form of economic growth,

‘The World Banks Global Economic Prospects for 2008 concentrates heavily fon the international trading regime and its implcation for developing countries The report argues the case for trade liberalization and the positive impact on developing countries, ilustrating a

‘on industrial goods, Supporters say that the proces hs just begun for ageclture and further real reform i needed, but

"governments manage the adjustment

‘properly within the brood poli latitude

‘they retain under the WO, opportunities will en up for those alsplaced by

‘competition frm imports

So, which story best fits reality? Does

‘agricultural trade liberalization condemn

‘agrarian cocieties to remain in poverty? ls the improved economic efficiency

‘that comes from trade liberalization

‘enough to offset job and income losses

‘experienced by vulnerable groups and individuals? How ate poverty and food Security affected as borders open up? [re development policies evolving in ways

‘that take best advantage af emerging

‘rade opportunities?

‘are the institution, infrastructure and safety net programmes availabe a {developing counties sufficient 1 cope

pro-poor programme of rade

Nberaization inal sectors, which, £

Implemented over five years to 2010 could

produce gains for developing countries

‘of nearly $350 billion by 2015 and

Feelace poverty by 8 percent This report

Contains a chpter devoted specially to

‘sprcuturl trade, providing a detailed

analysis of tends and pattems in word

‘grcutural trade and of pattems of

fagrcuturl protection, and a review of

Feform proposals in the Doha Round

Its summary, the chapter lays out the main

components ofa pro-poor agenda for

policy change in arieuturl rade ‘UNDP'S Making global wade work for

people (2003) concludes that trade should

be seen asa means to development

‘ather than an end, Trade as enormous

potential to contribute to human

‘evelopment, yet the current system

has fallen for short of expectations and

its many inequities are atthe core of

continuing controversies surrounding

‘economic alobalization Among the

key lessons, the report highlights the

‘experiences of industrial countries and

withthe rks to vulnerable groups? How

‘an developing countries compete withthe

‘economic and political clout ofthe much

larger and much richer industrial countries?

Can freer trade help overcome the mismatch

between abundant global food supplies and

starving families?

(an trade work forthe poor? This the

key question that ths year's State of Food

‘and Agriculture addretes tis also a key

‘question for the international development

community The United Nations Millenium

Declaration underscores the importance

of international trade in the context

‘of development andthe elimination of

poverty Inthe Millennium Declaration,

Sterne canton sn

succesful developing counties Fist,

‘economic integration with the world economy i an outcome of growth and

‘evelopment, nota prerequisite Second, Institutional innovations many of them unorthodox and requling considerable

‘domestic policy space and tesbilty have ben crucial for sucessful development strategies and outcomes

Finally the UNDP report argues that the design ofthe multateal vade regime needs to shift from one based on

a market access perspective to one based fon a human development perspective

IRshould aso be evaluated not on the bass of whether it maimizes the flow of

‘goods and services but on whether rade frrangements current and proposed ~

‘maximize possiblities for human evelopment, especialy in developing

‘governments committed themselves inter alla, to an open, equitable, rule based, predictable and non-diciminatory

‘multilateral trading system, FAO, alongwith other international cxganizations, focuses substantia attention

on this alLimportant debate on trade and poverty FAO, the United Nations Conference on Trade and Development (UNCTAD) and the United Nations Development Programme (UND, along

‘withthe WO and the World Bonk, have tach published recent reports addressing the links between development and trade (see 80 1

The State of Food and Agriculture 2005 highlights the common lesion, insights and inset both resolved and unresolved - presented in these and related publications

‘The report focuses more directly on how trade and poverty linkages cn be best ured

to enhance food security, adres inequality and improve overall economic growth

5

=

‘Trade, poverty and food security:

what are the linkages?

‘Te economic linkages among trade, poverty

and food security ae complex and national

‘experiences with trade reform have been

igh variable, Simple, unambiguous

messages are thus dificlt 0 enti

although some policy conclusions can be

‘drawn

“Trade-poverty-food security linkages are

vere in nature The ft inkage oeure

ft the border When a country liberalizes

Its own trade policies by lowering tarts,

for example, thự với est in lower market

prices for imports atthe country’s border

Wien ather countries liberalize thei trade

policies, his wil affect border prices of the

Fist country’s imports and exports

"The second inkage focuses on how pices

are transits from the border to ota

‘markets witha the countey: to producers,

Consumers and households in genera The

tetent to whieh households an businesses

the economy experience these pie changes

‘depends on the quality of infrastructure

fand the behaviour of domestic marketing

‘margins, a wel as geographical factors

“The empiial erature suggests thatthe

Legtee of price torsmision from the border

10 the local market can vary widely, even

‘The inital impact of trade iberaiztion

con households occurs once the loca market

price changes have been determined Not

Surprisingly, households that are net sellers

‘of products whose prices, in ative

terms, benefit nth fist rund Net

purchasers of such goods love

However, the literature also demonstrates

‘that fistround oftects ae altered

Significantly in the wake of subsequent

household adjustments in consumption and

production In response to changing relative

Drees, houchalds modify their consumption

Daske, adjust ther working Nuts and

possibly change thei occupation Changes in

felative prices con even affect a households long:term investment in human coptal

'8S households change ther spending

levels and employment patterns and

landowners and firms aajust ther hing &

‘wide range of effects pple throughout the

economy For example, wade reforms that Stumulateagecultural production often lead to2.general create in wages for undies Iabour Ths, n tur, benefits households that arenet suppliers of undid abeun

Final, the long-run growth effects sociated with trade liberalization need to

be considered, including increaes in frm prodvetity due to acces tones inputs and fecnnologes a well 8 potential gains due to the dscipining effect of fveign competition

‘on domestic markups

‘sacl how trade affects poverty and food security depends upon each county’s speci circumstance, including the Situation and location ofthe poor and food:insecure and the pectic reforms Undertaken, Understanding and managing

‘hese relationships requires county specific research and country specie polices One Size doesnot fal

FAO's ongoing studies and analse to date, provide encouraging lessons ane

‘overall policy guidance Among the many Important isso ithe nee for polity makers to consider more carefully than they have inthe past how trade policies can be used positively to promote pro-poor growth This involves atively mplementing polices

‘and making investments that complement trade felorms and enable the poor to take

‘advantage of rade-related opportunities,

‘oh estabising safety nes to protec

‘vulnerable members of sci:

‘The analss presented inthis report concludes that multilateral trade liberalization offers opportunities for

‘the poor and food-insecure by acting ax

a catalyst for change and by promoting Conditions in which the foodnsecure are fable te aie thee ncomes and ive longer, healthier and more productive lives Tako demonstrates that trade liveraization can have adverse effects especially inthe short run as productive Sectors and labour markets jut,

‘Opening national agricultural markets to international ompatiton ~ especialy rom Subsidized competitors before basie market Insitutions and infrastructure ae in place

an undermine the agrcuture sector with long term negative consequences for poverty and food secu Some households may Tote even inthe long run

‘Tominimize the adverse effect and

to take better advantage of emerging

‘opportunities, governments ned answers

toa wie range of questions: How does

trade poli ft int the national strategy

10 promote poverty reduction and food

security? How wil the trade reform proces

and the broader set of economy-wide and,

Sector specifi pales affect relative prices

‘atthe border? How vil local markets and

Gistrbution networks pass on these pice

effects? What are the expected effects on

employment? Which sectors, which parts of

the country, and what types of sls wl be

affected? What willbe the revenue effects

for the domestic treasun?

Not onl ae answers to these questions

needed, but immediate actions are requite

Consistent and sustained poi interventions

are needed to provide appropiate signale

{or pro-poor, pro-growth outcomes to

trade, Investments are needed in rural

Infrasrucure, human capital and other

public goods Policymakers need to give

priority othe expenditures and investments

‘that are mos essential to the poor and to

the long run vabiiy of thir vetIhoods,

Safety nes are needed both to protect,

vulnerable groups om trade-elated shocks

and tallow the poor to take advantage of

‘economic ppartuntisaring from trade

Of course, rade and trade reforms ae not

the only source of shocks faced by the poor

land food.ineecur A host of ether shocks —

‘natural, human-induced and marketelated

“an spel disaster in the absence of effective

safety nets

Safety nets are not, however, 2 subsitute

{or addresing weak institutions, inadequate

Infractucture and distorted factor market,

‘or for making essential investments in

heath sanitation and education for rural

people Safety nets merely complement thse

fundamental actions in preparation for more

‘open markets

= Overview of the report

Chapter 2 presents an overview of patterns

‘of production and trade in agriculture, wth

particular emphas’s on developing countries Developing countries are increasingly net

importers of food and many nave negative

net agrcutural trade balances This tend Tetkely to continue for many developing Countries even if OFCD counties reduce thelr agricultural protection and support polices)

‘ajicultural exports account fr less than 10 percent ofthe total exports fiom developing counties, ond less than

20 prcentin the case of LOC, Some counties remain mach more dependent on agricultural Commodity exports, however; these counties tare particulary wunerable to commodity pice shocks and weatherreloted sks (Over the past wo decades, the share of LOS and net food importing developing Countries (NFIOCS) in global agriutural exports has declined and the shae in global {ood imports has increased, FAO projections suggest a contining rising trend inthe net {food imports of developing counties tothe year 2030, The LDCS have seen arise in thi food impor bills relative to total export ceverues,

‘eating balance of payment difclties for many f these counties Many LOCS

<depend primary on egrcltre for their feconomle development, so unless they raise thei competitiveness in agrultuce oF verify ther economies, they wil become Increasingly dependent on aid and more indebted: From a food-securty perspective these countries are particularly vunerable

"Exports of processed agricultural products ace expanding significantly more que, than those of semi-procesed and bake

‘commodities, and now account for one- half of global agricultra rae, Processed goods offer more posits for product ditferetiation nd more opportunites for adding value, They ali have 3 larger potential or intrasndtry trade, ie trade that occurs wien a country export and imports goods inthe same industry) For

‘example, cocoa exporting counties are Unlikely to import cocoa beans Chocolate bars, however are more likely to be exported and imported bythe same country A varity

‘fecal, institutional and market Darts Festic the participation of many developing

‘counties in the more labourintensve, value-adding growth are

‘The share of agricultural ade among developing counties has increased shay during the past decade, partly oa result

of the emergence of regional wade

3gfeeente and partly because developing

‘countries represent the key growth markets

for agricultural goods ncome growth,

Urbanization and expancing numbers of

‘women inthe labour force are creating new

‘opportunities for increased trade among

Geveloping countries, especialy n processed

foo

Large transnational food companies and

supermarkets are influencing domestic food

Supaly chains trough fetal procurement

ogists inventory management and

istration networks, anda rapid se in

private standards and gradual ise inthe use

oF contacts

Chapter 3 examines the wade-poicy

landscape for agricuture, including an

assesment ofthe reforms that have occurred

Under structural adjustment programmes

tnd the WTO's Uruguay Round Agreement

in Agriculture (AOA)

Iti argued thatthe reform proces

begun under the Uruguay Round of rade

negatitions was an important fst step, but

has reauted in itl eal reform of agrcltral

polis so far Much remains tobe done to

Complete the multilateral reform process

‘Although countries have generally

complied with their commitments under the

Agreement international agricultural rade

continues tobe highly cstrted A review

ofthe sate of agricultural protection in

the worl suggerts that protection remain

high in many countries, withthe highest

protection being applied by developed

Countries ana higher-income developing

‘Counties Taf peaks and tariff escalation

tteate severe distortions that systematically

twork agains the efforts of producers in

developing countries to eter the rapialy

‘growing markets for processed products ‘Many countries complied with their

[AoA commitments on domestic support by

‘doping policy measures that are exempt

from dilines The degree to which the

oppor meatures tat are curently exempt

fare decoupled from production continues to

be debated, but the evidence suggests that,

they are not entirely roduction-neutral

Farther effective disciplines are needed to

ensure that domestic support measures are

minimally rage-distorting

Export competition appears tobe an area

winere significant reform ilikely inthe

current Doha Round of trade negotiations WTO members appear tobe ready to eliminate rect export subsidies, although isset of timing and of equivalence with other export competition measures remain sontentous Efetve đạượlnes are needed,

bt particular care must be exercised to ensure that further dicplines on food aid do not interfere with ts humanitarian coe, Developing country experiences of market reforms under structural adjustment have been highly variable: some countries have fully and consistently implemented reforms

‘while others reformed in name only or reversed course unpredictably Such stop- and-go policies can negate the potential benefits of agricutural and trade policy reforms,

‘The thee s-alled “pillars” ofthe AOA (Gomes support expat competition dnd market aces) ae interned Many

‘developing countries continue to resist reducing tei tari a long a thee farmers have to compete with subsided production from other counties

Chapter 4 surveys some ofthe most recent

«economicmodeling exercises that explore

‘the potential economic gains atthe national love resulting from serous reforms of the trade and agricultural policies of both eveloped and developing countries, Policymakers need good analytical impacts of alternative polity choices and

to devise appropriate measures to ensure that the mott vulnerable groups are Supported during the wade reform proces The quantitative studies discussed use a variety af modeling approaches and differ Significantly in their details Despite these ferences, however, afew consistent

‘conclusions, summarized in the paragraphs below can be observed

"Agrcltural rade eeforms could produce important welfare gains atthe global level for mort but aot al individual countries, Several recent studies suger that the largest gains would be aheved under comprehensive iberaization programme that address all economic sectors and 3l regions Senarios mn which a single sector or

‘r0up of countries liberalize would produce farsmaller gain,

Industrial countries have the mast to gain

‘rom agricultural trade liberalization, in

absolute terms, because thei agriculture reforms that focus solely on agriculture and Sectors ae the most cistorted by existing _ foley on OECD counties Spell attention polis Consumersin curently protected shouldbe given to labour markets to ensure markets and producers countries with low that the poor are able to make good use of levels of damesticsuppert would end to what may be ther main aset~ ther labour gain the most (Chapter takes the analysis from the

“The potential gains from agricultural macroeconomic evel to the household level

‘rade liberalization for developing counties, to examine the impact of agricultural trade although smaller in absolve terms, would on poverty

be larger relative to gross domestic product The results conf thatthe primary (GOP) because agrcuture constitutes endowment af the poo" thelr labour, and comparatively large share of ther economies thatthe impact of trade pale reforms on While developing counties asa group unskled wages i centzal to the poverty ond to Benefit fom liberalization, some story, underscoring the Importance of 7eus could be hurt, a east in the short domestic pai reforms aime at improving Fun, NFIDCs and recipients of preferential the functioning of labour markets

‘access to highly protected OECD markets re ‘For many developing counties, the vulnerable tis regard principal way in which trade generates

Te liberalizaton of domestic supports and postive impacts on poverty and food security export subsidies in the OECD counties could is through non-agricultural incomes Jeb result in higher food prices While produces creation and higher wages in non agriculture

‘would benefit from higher commodity prices, sectors are the biggest promies of trade

‘Consumers would pay higher pies for food reform

Fornet food importers, thenegatve impact Poverty and hunger ar alt influenced fon consumers could autweigh the potential by price changes rng from trade

benefit to thee producers liberalization, The madel-baved stucies Furthermore, developing countries that cused in Chapter suggest that net currently cely on preferential acces to OECD —_purcharers of agricultural commodities ceuntles To thelr exports could be harmed {most ofthe poor] would be hur by the

by reforms that reduce the value ofthese higher prices predicted in the wake of, preferences, unless compensatery measures comprehensive trade reform

‘are putin pace Higher commodity prices may indeed hurt

‘The net result for these vulnerable ‘the poor in he short un, but, inthe longer countries depends crucialy onthe poly run even net purchases can benef higher Fesponde ofthe county self andthe ability commer prices transite into more job ofits people to adjust to the changing fand higher wages The cases reviewed in

‘economic dicumtances This argues fora Chapter suggest that this often the case Concerted programme of technical assistance Safety nets and food ditbution schemes

‘and support for these counties before and can ato help ensure that low-income

‘uring the reform proces Consumers are not penalized by ses inthe

‘Some developing county exporters would prices of food import,

‘gain a2 result of OECD liberalization, but "Another avenue through which rade benefits for developing countries are aso refgrmscan promote propoor growths

‘exacted to come from the ibeaization of by remoning tar on agricultural inputs trade among themselves Indeed, between (machine, etlzrs nd pestis) n

Dard 8 percent ofthe potential Beneits developing counties Many developing fordeveloping countries would resut fom Counter continue to penal ther agrcultre their own reform polices in arcuture sectors ith these kinds of aves Their

ob creation and wage growth forthe removal would improve the ters of trad for rural and urban poor constitute ane of agreuture and help producers compete on the man avenues through which ade both damstc and intemational markets Hiperaization can benefit developing The evidence presented inthis chapter

‘countries Moreover, a broad-based suggests thatthe trade-growth linkage

‘multilateral trade liberalization programme canbe an important vehicle for poverty ismore likely to benefit the poor than would reduction However it potent inthis

respect depends ruc on eee

‘education and health,

‘Chapter 6 examines the significance

of trade reform for food security Fo0d

insecurity and poverty are closely intertinked

but distinct phenomena, While food

ineecurity soften a result of poverty, ie

sito a leading cause of poverty Hunger

and malnutrition can permanently stunt

the developmental capacity of children,

making & more dificult for them 0 grow

{nd leden, Hunger has longer-term economic

implications becaue it reduces people's

capacity t0 work and fight disease,

‘Agricultural rade and trade poli affect

food security in many ways For many poli

‘makers, tas on basi fod commarities

represent an ongoing cemme The

justiieation for such aris atten that they

lffer protection for domestic produces from

Imports of subsidized commodities however

they aso raise the cost of food, thus taxing

the people who can lear afford i Tis effect

has immediate humanitarian implications,

ofcourse, because 852 milion people inthe

‘word ac te ability to grow or buy enough

{ood for ther needs,

Trades contribution to food security

involves aspects ether than market access

In agriutre ft means better racing

sonditon fr non agriultural products a

‘wel hen improves aces by the poor and

Teodinsecure ojob, income, assets and

food

“This chapter presents a racent assessment

(of 15 county case stusies undertaken by TAO, examining country experiences ofthe

ffec øf trade and economic reforms on

food security Although these experiences

lessons can be identifies

First a country’s pre-existing economic

structure and policy environment have @

strong influence onthe results of policy

feforms, The existence and functioning

‘of market institutions are particularly

Important in thi regar In counties where

refoims involved the dismantling of state

agrcutual institutions finging mecnansms

fo encourage and asi the private sector to

fil these gaps was vita

Second, countries that implemented

targeted transional meaores to protect and

compensate vunerable population groups were more sccefulin ensuring postive food-securty outcomes Many countries experienced ditfcutes in implementing safety net programmes effectively

In aaltion to safety nets, complementary policies aimed at improving the productivity Band competitiveness of the agriculture sector

‘were aso essential to postive food security

‘outcomes Creating a policy environment

‘support productive investments by small farmers made it much moe Hikely that they could respond to rice incentives and take advantage ofthe opportunites offered

by reform Improving rural intrastuctore

‘as important in most counties, bu it was Particularly needed in lowincome seas

In countries with 2 large proportion of loweincome and resource-poor people living Incural areas and dependent on agrcuture, Fefocms aimed at raiing producti, {eating nomagicututl employment and facitatng the vanstion out of agrcuture were esenta for enhancing food security in the medium-toong term,

However, because such polices may take sometime to yield reals, they should be {et in motion before enacting trade or _2grieuturl pole eforms that may impinge

‘on low-income, fooe:intecure households,

‘The sequencing of reforms requires special and ongoing attention

‘Chapter 7 outines a bwin-rack approach twensuring thatthe poor and foodnsecure are able to capture the potential benefits of agrcutural trade and further ade reform

Ie asks whether the necesaty investments arebeing made to ensure thatthe poor land hungry ae able to share in the gains

‘om trade Finally, i draws some overall conclusions othe report

Trade policy refarm can offer opportunities

to the poor and food insecure, ut the adjustment process must be managed {relly and adequate protection of he vulnerable and Íoodinsecure mu be: ensured

Trade iberaliztion can be a key component for promoting and sstaning agricultural growth Expanding markets Skeneas provide farmers with opportunities

to supalyreher markets and develop brands and qualities that enable ther to inereare thair returns from sles Liberalization cạn

also create conltions for aster income

‘growth though beter acess to ies,

technelegy, goods, serves andl capital

and by promoting a more efiient use of

_"e#ouresthrough spedalisddon and the

Scape for economies of sale, Such growth

‘an alt benefit domestic agricltre

However, the benais fom vade

‘ivealzation donot come automaticaly,

Many developing counties need comparion

polices and programmes that hep increase

Aagricutural productivity and product quality

if they are to rate their competitvenes in

domestic and international markets

Examples of companion policies

Include institutional and market reforms,

Investments inroads, market information

systems and related Service industries, and

policy measures to promote approprite

fecnnologial innovations Above al

ounttes need 1 ensure that vulnerable

individuals, households and groups that may

be disadvantaged by the inital impacts of trade reforms ae identified and cushioned

‘through weltdesigned measures and safety

"These policies are described mote flyin FAO's tn-trac approach, which focuses on (creating opportunities forthe hungry to Improve thei velinoods and (i) ensuring

‘access to fo0d forthe most needy through

"Sỹ nets and other direct esstance

“Trade poli reform, ike anyother potential shock to an economy, ental ojustment costs and not everyone necesaily benefits Governments a developed counties and developing

‘counties alike havea responsibly to ensure

‘that the refoum process it managed in aay

‘that minimizes the rik to vulnerable groupe

‘and maximizes thelr opportunities to share in the gains

2 Trends and patterns in

international agricultural trade

‘To help understand trade's role in

‘contributing to food secrity and poverty

eduction, this chapter begins with an

‘overview ofthe role of trade inthe world

economy, We build an ths overview to

txplare how trade patterns are shifting,

Contrasting te citferences between

fleveloped and developing countries in

International agricultural trade

“he global economy, including agriculture,

Is integrating rapily through trode t

the same time, the exports af developing

Countries are becoming increasingly

diversified, so that these countries are les

dependent on agricultural exports than

‘they were Inthe past Moreover, developing

counties are rapaly becoming thei own

‘best markets for agricultral products

Exports of proceed agrultral products

are expanding and now account for

Bimost haf of global agricultural trade

‘This phenomenon i being driven by

đemographie sodal and economic trends

hết re ranformlng the agtcuitvaland

food markets in developing counties

Supermarkets, for example, are ray

merging a 3 major force in developing

The LOCé face particular challenges in

worl agricultural markets Tey are much

lees integrated int the world economy

than are developing counvies asa whole,

apd tis feature is partclaiy strking for ther agriculture actors Asis the cove

for developing countries 3s a group, the

{Des have seen ther agricultural exports

decline 6a share of total exports, but tele

‘agricultural imports, most food, have not

fallen as share of total imports and they

now face a large and rapidly growing trade

‘nd services Global rade in goods and Services is expanding mare rapialy than slobal cor International rade in agricultural products hạt lse expanded more rapaly than global

‘sgriuturel GOR although a ower rates

‘than for oveell ade in goods and services dnd overall GOP (Figure 2} Slower growth

in agricultural output and wade reflects the Aecining relative importance of agriculture Inthe werld economy and in world ade

‘The result ofthe more rapid expansion

of wade (exports plus imports) relative

to output isillustrated in Figure 3 rade Intensity, expeesed a aati af total rade

in goods and services to total GOP has Increase from less than 30 percent three {ecades ago to almost 50 percent today

‘This rend hasbeen even more dramatic for agricultural rade including fisheries and forestry), which has growin trom around {50 percent to more than 100 percent during

‘the sme peri The high rage intensity

‘of agriculture reflects the complementary nature of agricultural production in different agroecologieal zones anda high level of intra industry ade inthe sector Nevertheless, the increasing importance

of agricultural trade relative to agricultural futput has not prevented agiclturl wade from losing its relative importance a8 3 component of international trade Indeed,

‘wile agricultural ade continues expand, itsshare in total merchandlee trade continues {0 fall fom cle to onethite four decades ago to around 10 percent today a5 Seen in Figure 4

TT — partie value added

1 of trade to GDP in the global economy

— Agieluul trade greta GOP — Total wade Tora 0?

‘The past four decades have aso seen

major changes in geographical patterns

‘of agricultural trade An increasing share

‘9f global agricultural exports originates

‘rom developed countries The European

‘Union (EU) counties account for most of

thi growth their share of total agricultural

‘exports has increased from slightly more

‘than 20 percent inthe early 1960s to more

‘than 4 percent toda large portion ofthis

Increases accounted for by inta-£U trade,

‘which raprasents around 20 percent of wold

agricutural trace

‘Conversely, uring the past four decades,

the developing countries have seen their

share of weld agrieutural exports decline

‘om almost a0 percent to around 25 peeent

Inthe early 18805 before rebounding to

around 30 percent today This contrasts with

the steadily increasing share of developing

‘countries in total merthandise exports Over

this same time period, the share af global

agrcutural imports purchased by developing

Countries has increased from less than

20 percent ta around 30 percent (Figure 5)

The role of agricultural wade in the

overall trade patterns has changed in both

Geveloped and developing counties Over

intote morenande exports the past four decades, the developing countries have seen a major decine in the share of agricultural exports in theie total merchandise exports together with a slower decline in the share of agriculture in their total imports (Figure 6, page 16) They have moved from a positive nt 2oicltural trade position, with exports exceeding imports by 2 significant proportion, #9 @ Situation in which agricultural import and

‘exports have been roughly balanced io Developed countries have seen their share

‘of both agricultural exports and imports decline mete slowly over the some petiod (Figure 8) Today or both developed and developing counties, agrcutural ade is

‘oughly balanced and corresponds to around 1opeccent of both total merchandise imports and exports

‘Both the developed and the developing

«country groups have seen an increasing degree of integration of ther agriculture Sectors into world markets a expressed bythe ratio of agrcutural rade (exports plus import) to agricultural GOP (see Figure) This extremely pronounced for developed countries, due 1 very high levels fof exchange of agrcutural products in particular among the EU countries ‘As seen in Figure on page 18, the role

of agricultural trade varies among the

veloping county regions Only Latin

‘America and the Carbbean regien has

‘maintained a strong postive net agricultural

‘exporter postion Indeed, ageeutual

‘exports continue to occupy 9 mar share

fof the region's total merchandise exports,

‘although the shore has approximately

halved over the past 40 year, fom around

50 percan to between 20 and 20 percent in

the mest recent year

‘Sub-Saharan Africa has seen an even

sharper dedine nthe share of agriculture in

its export fram more than 60 percent four

decades ago ta around 20 percent tay The

‘egion remain a net agricultural exporter

but with ts agricultural imports and exports

5 See Se er

—— Agfelurdlimsots

— ‘1a mechan impons

overt balance than in the cage of Latin

“America nd the Carbbean

For Asin and the Pact, both agricultural

“g2 and imports account for les than

10 percent of total exports or imports today:

‘only in the most recent years has the region 5een an agrcutural net import psition,

‘The Naar Ear and North Africa region i characterized by a significant agrieutural ade deft, which emerged after 1973, asimports

‘expanded rap follwing the ol price boom, Since then agricultural exports have accounted {for ates sightly more than S percent of ota rmerchande exports and agricultural imports row acount for around 15 percent of toi rmerchande import

fof the 19808 ‘Agricultural trade in the least

‘One ofthe most striking phenomena developed countries, evident from Figure 9 the oradual

‘marginalization of sub-Saharan Africa on The LDCS represent a particular case in terms Internationa agricultural export markets; of long-term trends in global agricultural the tegios share of global agricultural trade, The agricultural exports of thi group

Ratio of trade to GDP in developed and developing countries

Agvet tae Agricul GDP

cof countries have declined dramatically

asa share of thelr overall exports, wile

agricultural imports have consistent

represented around 25 percent oftheir

total import (se Figure 10, page 20,

‘The LDCs have moved fom a position of

net agricultural exporters to one of net

agricultural importers, and since the late

4980s ther agricultural trade defi has

widened rap

{At the same time the LOC display a

strikingly lowe degree of integration of

their agriculture sector int world markets

‘compated with the developing countries

‘overall (igure 1, page 2, se ao Figure 7

In the mid-1960s, ther agricultural trade (expons plus impor) coresponded to slighty more than 20 percent oftheir agnculural

GP representing about the same ratio as

‘that ofthe developing countries overall ince

‘then, however, the alo fr the ĐC has Increased only slightly, to around 30 percent,

“while for the developing countries overall hasincreed to around 89 percent

- Agricultural trade within regions

‘There has been a tendency in recent decades towards increased intensity of

‘Within the developed countries,

agricultural trade remains largely and

increasinly self-centred: ome 80 percent of

developed country agricultural exports are

<estined t other developed countries and

‘more than 70 percent of developed country

<eveloped countries

Particularly significant isthe role of

‘wade armong EU countries, with mare than

70 percent of EU country exports going

to, and more than 60 percent of thei’

imparts coming rom, other EU countries

‘Agricultural trade amang the EU counties

‘tepresents 30 percent of total weld

In contrast although agricultural rade among the developing counties hasbeen Increasing, partcaarly during the 19505, they sll depend tos large extent on the developed counties, both 25 outlets for their agicultural exports and as suppliers of their agicutural imports

“The proportion of developing country agricultural exports going to ather

veloping countries grew from 31 percent share of agricultural rade taking place within

in 1990 to 40 percent in 2002, wileon the individual regions

import side the share of developing country

imports originating in other developing ME

‘countries expanded from 36 percent to _-_-Processed products and the role

45 percent over the same period of supermarkets

“This trend towards inreaed weight of rade

among other developing countries sine 1990 The share of procested product in

iscommen toal regions andreflesa growing agricultural trade has been increasing for

peep

Percentage

`

both developed and developing countries,

but remains much higher fer the former

‘group lee Figure 12), “There are wide differences among the

veloping counties For the LDCs, the share

fof processed products in total agrcutural

‘rade is significantly lower than forthe

‘overall group and has been gradually

‘eclning Only inthe second half ofthe

1900s did the share of processed products in

Loc agrcutural exports begin to increase

The rapid growth in processed

‘agricultural trade has less to do with

‘2gricultral trade policy eferm than with

‘the massive demographic and economic

transformations that ae sweeping through

the developing world Urbanization the

participation of women n paid employment

‘and sing incomes have inereased the

‘opportunity cost of purchasing and

preparing bulk foods and help explain the

rapid shifts towards processed foods that

{are ocurrng in both international race

and domestic markets

Related tothe growth in procesed food

‘trade's the rapid expansion of supermarkets

in many developing countries Research

suggests that in Latin America, where this

‘rend i most advanced, the quantity of

fruts and vegetables purchase from local

producers by supermarkets to supply local

Fores is25 times higher than the total

— est developed counties

‘export of produce fom Latin America tothe

‘est ofthe world (Reardon and Berdegue, 2002)

Many of the supermarkets that are

‘emerging in developing countries are

‘owned by multinational chain based

in Europe, Japan and North America

‘These companies face saturated markets and intense competition in their home markets and they have been attracted by

‘the higher profit margins to be obtained

by investing in these new markets The liberalization of polices governing foreign direct investment in the retall sector has facltated the trend,

“These global chains diffuse management practices that promote efficiency in logics

‘2nd inventory management, leading to

‘centalzed procurement and consolidated strioution patterns The organization of

‘etal rae s being transformed in tems of larger volume per supplier, fewer supplies,

‘the apiddsappearance of smal famli-

‘owned retailers and a reduction inthe role

‘of central markets shifts occurring away

‘rom traditional wholesaler and brokers towards specialized wholesalers and towards

‘export fms with new domestic market functions Agifoad market institutions {ate being affected also, with a rapid ie la private standards and a gradual rein the

‘These emerging supermarkets do not

cater only to higher-income consumes

In Asa and Latin America, they are

expanding inte poorer neighbourhoods,

smaller towns and ural areas, targeting

lower and midcle-clas consumers The

purchasing practices of the supermarkets

7e transfering agifood markets in

feveloping countries, with important

Implications for small farmers and tural

‘communities, Fundamental changes in

the smalnolder farming structure need to

‘ctur i order for them tobe abe to supply

‘according tothe supermarkets

andares

Farmers have to produce what thế

supermarkets demand in terms of both

‘quantity and quality They often have to

comply with certification requiements

that are more stringent than offical food

safety standards Meeting the demands of

procurement officers requires level of ski

and technology that smal farmers chen

Go not have They may have to invest

Indviually or cllcively in rigation,

‘greenhouses, truck, cling sheee and

packing technologies, among other things

‘Tey need tobe able to sor and grade

ther produce, meet timing and delivery

requirements, and document thet farming

practices n aeltion, they need to be able

to bridge the gap between delivery and

payment, which presupposes acess to ered ‘Downstream, the changes have potential

benefits for consumers in terms of greater

‘are reduced seaanality and lower pies

‘of food prods stem of food safety,

tracing the source of fod contamination ha

become easier, but there i ato aris that

unsafe food that may enter int the food

chains distributes rap

= Key findings

Several key trends in international

agrcltural trade hove important

.mlcatens for smal farmers andthe food

Insecure Wile policy-makers are gradually

recognizing these implications, lca, national

{and international plcy and programmes

‘eed to adapt apy if hey are to voi

further marginalzing these groups < The global conemy Induểing

agcutue,s integrating rapidly

through trade, The rate of growth in Aagrcutual trade over the pat decade has been about 3 percent annually, more than three times the rate of agricultural output growth

+ Developing countries are much es dependent on agricultural exports than they were in the pas

+ Developing countries ae rapidly becoming their own bast markets for agrcutural exports

+ Exports of processed agricultural product are expanding rapidly, driven by Semographic soil and economic tends + Supermarkets are emerging ara major force in developing counties

+ The Locs are now much ess integrated into the world economy than are Geveloping countries a a whole, and this is particulary striking fr thet agricuture sectors

+ In contrast withthe growing importance

of procesed agricultural exports in other Seveloping countries, the LDCs have Seen the share oftheir processed product exports decline from around 30 percent

‘of ttal agricultural exports inthe 1960s

`