FAO Experience in Agricultural Trade Policies 13 th Meeting of the COMCEC Agriculture Working Group 21 February, 2019, Ankara, Turkey Ahmad Mukhtar Economist (Trade and Food Security), FAO Geneva]
Trends and Scenario Food Security and Agriculture Trade
Low-Income Food-Deficit Countries (LIFDC) - List for 2016 AFRICA ASIA AMERICAS OCEANIA AFRICA Madagascar Afghanistan Haiti Benin Papua New Malawi Burkina Faso Bangladesh Nicaragua Guinea Mali Burundi Bhutan Solomon Islands Cameroon Mauritania DPR of Korea Central African Mozambique India Definition Republic Niger Kyrgyz Republic The classification of a country as low-income food-deficit used for Chad Nigeria analytical purposes by FAO is traditionally determined by three Nepal Comoros Rwanda criteria. First, a country should have a per capita gross national Pakistan Côte d'Ivoire income (GNI) below the "historical" ceiling used by the World Bank Sao Tome and Syrian Arab DR of the Congo to determine eligibility for IDA assistance and for 20-year IBRD Principe terms, applied to countries included in World Bank's categories I Djibouti Republic Senegal and II. The 2014 LIFDC list is based on the GNI for 2011 (estimated Eritrea Tajikistan Sierra Leone by the World Bank using the Atlas method) and the historical Ethiopia Uzbekistan Somalia ceiling of USD 1 945 in 2011. The second criterion is based on the Gambia Yemen net (i.e. gross imports less gross exports) food trade position of a South Sudan Ghana country averaged over the preceding three years for which Sudan Guinea statistics are available, in this case from 2009 to 2011. Trade Togo Guinea-Bissau volumes for a broad basket of basic foodstuffs (cereals, roots and Uganda tubers, pulses, oilseeds and oils other than tree crop oils, meat and Kenya Tanzania dairy products) are converted and aggregated by the calorie Lesotho content of individual commodities. Thirdly, the self-exclusion Zimbabwe Liberia criterion is applied when countries that meet the above two criteria specifically request to be excluded from the LIFDC category OIC MS: 29/53
Agriculture Trade Climate risks WTO Standards Agriculture Trade RTAs, FTAs Subsidies Supply Price Chains volatility
Interplay between Agriculture and other policies
ABC of Trade Policy: Enabling Agriculture Trade Adaptable Beneficial Multilateral National Complementary Distributive Enabling Fair
Trade Policy: Enabling Agriculture Trade Global National Operational Multilateral/ WTO Integration in Enabling disciplines GVCs Regional/Bilateral Rural Economic Competition Agreements Integration Policy International Women economic Fiscal and Trade flows participation Monetary Policies Social policies Standards, Regulatory compliance
As food prices increased dramatically in 2006-08 and 2011-2012, there was a greater focus on domestic markets in pursuit of national Food Security objectives High food prices and volatile global markets Negative implications for purchasing power of the poor, increasing food import bill Concerns for food security Policy responses, in particular trade policy (typically export restrictions and lowering import barriers) Also greater focus on fostering domestic production International agenda: G-20, WTO negotiations on agriculture…
Typical measures for stabilizing domestic agriculture markets • Export restrictions Trade policy • Reduction of import duties • Subsidies (input, output), state purchases Support to agriculture • Access to credit • Technical assistance • Social protection, targeted transfers Support to consumers • Food aid and school feeding • Subsidized prices on basic foods
Trade: Support to agriculture and agricultural development Need to look beyond short-term policy consequences. • Longer-term food security requires policies that promote sustained agricultural productivity increases • Consideration to the level of economic structural transformation and the role of agriculture in the • economy. STA TAGES O OF A AGRICULTU TURAL T TRANSFORMATI TION Earlie lier Lat Later STAT ATUS OF OF • Largely non-commercial production • Commercialized production AGRICULTU TURE • Fragmented input and output markets • Functional input and output markets • Limited risk management instruments • Adequate risk management instruments GOV OVER ERNMEN ENT AC ACTION Pha hase se 1 1 Pha hase se 2 2 Pha hase se 3 3 Investments Subsidies kick-starting Withdrawal establishing the basics markets DOMESTIC • Government incentives have a critical role providing • The use of interventionist approaches can SUPPORT access to finance and input and output markets at become increasingly detrimental; instead, it is POLICY low cost and low risk, to allow farmers to generate a important for governments withdraw from surplus market activities and allow the private sector to take over. TRADE • For a defined period of interventions to promote • In more mature economies, where input, credit POLICY productivity-enhancing private investment, trade and output markets function more efficiently, it policy can help reduce production risks and provide may be appropriate to liberalize agricultural the stability needed for producers to react positively trade policy to release further agriculture to the incentives. growth potential.
Agriculture Trade Using as an enabler for achieving food security
Linkages between trade and food security The links between trade and food security are inherently complex, with several channels of interaction affecting the different dimensions of food security simultaneously. Food Supply Production Availability o Immediate effects on : Production; Net Trade; Stocks food production, total supply, prices, Prices employment and Access government revenues Competition Growth Household Income Food safety, Trade Food Farm Income; quality, variety waste/ Employment; Wages; Distribution & loss o In the longer run, effects Transfers Infrastructure Utilization on : competition, marketing, infrastructure, Social Labour Market protection value chain development, Government Stability investments. Government Services Budget Food Safety; Health; Weather, Education climate change, conflict Food security dimension Economic variables directly affected by trade Legend: Endogenous intervening factors Economic variables indirectly affected by trade Exogenous intervening factors
Impacts of trade on food security and nutrition Trade can have both positive and negative effects on each of the four dimensions of food security. The short and long-term impacts potentially working in different directions can make it difficult to determine a generalizable relationship. Sho hort term Mediu dium t to Long T Term • Trade boosts imports and • Food production may increase due to greater specialization, and increases the quantity and productivity improvements may be triggered by greater competition variety of food available Availabilit y • Trade may decrease the • In net food-exporting countries, domestic availability of staples may domestic availability of crops decline , as production is diverted toward exports; in net food importing in net exporting countries countries, some producers are likely to curtail production, forgoing the multiplier effects of agricultural activities in rural areas • Food and input prices are • Incomes would rise in competitive sectors , due to greater market access, likely to decrease for net food and g rowth and employment would be supported by export growth and importing countries inflow of FDI Access • Domestic prices of exportable • Incomes may decline in import-competing sectors , with some products may increase for net producers transitioning out of agriculture. Also, unequal distribution of food-exporting countries gains may occur due to enclave developments in export crops to the detriment of broad-based smallholder food crop production Possible positive effects Possible negative effects
Impacts of trade on food security and nutrition Trade can have both positive and negative effects on each of the four dimensions of food security. The short and long-term impacts potentially working in different directions can make it difficult to determine a generalizable relationship. Short term Medium to Long Term • Greater variety of food • Food safety and quality may improve if international available may promote a more standards are applied more rigorously balanced diet Utilization • There may be greater • Prioritization of commodity exports may divert land and consumption of food that is resources from traditional and indigenous foods , which cheaper, high in calories and are often superior from a nutritional perspective low in nutritional value • Imports mitigate likelihood • Global markets are less prone to policy- or weather- of shortages resulting from induced shocks local production risks Stability • Countries may be more • Sectors at earlier stages of development may become vulnerable to changes in more susceptible to price shocks and import surges trade policy by exporters , such as export bans Possible positive effects Possible negative effects
Way Forward Agriculture Food Trade Security
“Trade liberalization is like opening a window…” (Eugenio Diaz-Bonilla) The outcome will depend on: The “weather” outside The degree of openness The conditions inside
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