Globalization and Food Security

Transcription

1 Globalization and Food Security 1. Concepts of Globalization and Food Security 2. Analysis of Agricultural Globalization 3. Interpretations, Benefits & Costs

2 1. Concepts of Globalization and Food Security

3 Openness Globalization Openness VS Globalization policies aimed at external economic integration + concomitant domestic policies or constraints on policies increased external integration actually effected Strict openness (Laissez-faire, Laissez-passer) is neither necessary nor sufficient for globalization In most countries, openness has been the focal point of the reforms since Structural Adjustment Programs or other national liberalizations were instituted

4 Instruments of Openness and Liberalization Non-tariff restrictions on imports (initially of capital and intermediate goods) eliminated Export incentives broadened, and state trading monopolies eliminated Tariffs reduced on average by over 80% Steep devaluations cut the real ER Deep cuts in barriers to FDI and PF flows De-licensing of (large-scale) private sector De-reservations in public & small-scale sectors Privatization of public enterprises

5 What is Food Security? Food security [FS] prevails if both food supply and demand are sufficient to cover food requirements on a continuous and stable basis Food insecurity [FIS] prevails if, at any time (occasionally, repeatedly, or permanently), food supply or demand (or both) fall short of requirements

6 Dimensions of Food Security and Their Interactions Availability: level of food supply Access: effective demand or entitlements Stability: variations and risks

7 Food Security and Hunger, Undernourishment, and Malnourishment Hunger: subjective feeling of food deprivation over very short or long periods Undernourishment: <90% of minimum caloric intake Malnourishment: nutritional imbalance (lack of specific dietary components)

8 Physical and Economic Dimensions of Physical availability Availability and Access Economic availability: economic supply Physical access Economic access: economic or effective demand

9 Food Security at Different Levels of Analysis Food security at the National Level Regional Level Household Level Individual Level Food security at different levels can be independent of each other e.g. country can be FS at national level and FIS at household level

10 2. An Analysis of Agricultural Globalization

11 Objectives of the Analysis 1 External Integration of DE AG Price and quantity measures of integration Impacts on growth, productivity & employment "Before/After 1980" Periodization Average changes and trends by decades Analysis in implicit North/South framework Relation to national & international policy shifts Neo-Liberal vs Structuralist Rationalizations 2 Doha Round: Theses & Anti-Theses

12 National and Global Rules SAPs and the AA have effected a double transition, national and global 1 National (SAP) Adjustment Before UR-AA SAPs enforced liberalization even before AA Aimed to reduce anti-ag bias (due to ISI) and urban bias (political regimes) Direct and indirect taxation of AG estimated at an average of 46 % of GDP

13 SAPs made institutional, fiscal & trade policy changes strongly affecting AG Reduction or abolition of export taxes and quotas Reduction or elimination of controls on international agricultural trade (including state boards) Reduced import tariffs, and elimination of import licensing, quotas or prohibitions Elimination of internal regulations and restrictions on private sector marketing Decline in public production-and-infrastructuralservices (research, inputs, credit)

14 Neglected (Unintended?) Consequences of SAPs While tradable-output relative prices rose, non-tradable relative prices (obviously) fell Major reductions in private input subsidies (both explicitvia-the-budget and implicit-via-the market) e.g., fertilizers, credit Substantial cuts in public-goods expenditure and services provision critical for AG growth e.g. public agricultural research Three Groupings of Countries 1. SAP ECONOMIES: Convergence to liberalized agricultural policies 2. SEMI-IND. ASIAN ECONOMIES: retained earlier AG policies geared to home, not global, markets 3. ADVANCED ECONOMIES: retained agricultural mercantilism

15 The Agreement on Agriculture (i) Tariffs and Quotas Quotas and other QRs to be converted to tariff equivalents AE tariff cuts: average 36%, minimum of 15% on each product (1999) DE tariff cuts: average 15%, minimum of 10% on each product (2004) Dirty tarrification through inflated base tariffs: EU (61%), US (44%) so that there is an actual increase in the final bound tariff Market Access provisions for both DE and AE In AEs, post-ur AG tariffs remain 6 times IND tariffs AEs retain special safeguard measures

16 (ii) Export Subsidies Fiscal subsidy expenditure to be cut: 36% in AEs and 24% in DEs Volume of subsidized exports to be cut: 21% in AEs and 14% in DEs (2004) *Most subsidies are in AEs, not DEs: so future DE subsidies are preempted

17 (iii) Aggregate Measure of (Domestic) Support AMS reductions: 20% over 6 years (AEs), 13% over 10 years (DEs) 88 * DEs reported below-constraint AMS De minimis exclusions of 5% and 10% AE Exclusions: EU and US deficiency payments DE Exclusions (i): DE input subsides for poor producers (ii): Non-trade distorting Green Box measures (research, environment, crop insurance) (iv) TRIPS-Agriculture Patents or sui generis IPR for plant varieties and microorganisms

18 Trends and Patterns Production, Prices, Terms of Trade PRODUCTION DE AG (GDP) growth rate under import substitution was high and stable [Figure 1A]. It rose during the 1980s (with falling incomes) but has fallen by 60% in the 1990s Growth of per caput AG income negative for the first time in 4 decades (-0.3 %). AE AG growth also fell during the 1990s (to 0 %) PRICES Growth in the price of world-wide AG exports relative to all exports was negative in the 1960s-1970s and 0 in the 1980s but rose to 1.6 % pa in 1990s Due to liberalization pressure on AE subsidies & on DE AG public investment.

19 TERMS OF TRADE DE AG export prices fell in every period [Figure 3A] and so did DE AG import prices except that they did not fall in the 1990s. DE Non-AG export prices also declined in 1990s (contrast preceding decades) while Non-AG import prices showed no trend Overall: 10 % decline in the DE TOT. The implied 0.8 % GDP loss pa for DE is about equal to their projected gain from all the reforms of the post- UR regime!

20 Figure 3A: Relative Tradable Prices Facing DEs DE Ag. Exports DE Ag. Imports DE Non-Ag. Exports DE Non-Ag. Imports 1960s 1970s 1980s 1990s

21 External Market Integration QUANTITIES AG.Trade/GDP increased for both DE and AE [Figure 4A] AE (132 %) far more integrated than DE (32 %) DE integration grew from 22 % in 1960s to 32 % - mostly in 1980s, 1990s But declining DE AG trade balance [Fig 3B]. DE share of world AG exports fell from 39 % to 28 % and of imports rose from 16 % to 25 % [Table 2] So increased globalization due to import increases and despite export decreases Since this occurred with liberalization, DE AG comparative advantage must be in doubt

22 Figure 3B: Agricultural Trade Balances (DEs) (at current prices) Cereals Other Food Textile Fibres Other Non-Food Ag. Total Agriculture s 1970s 1980s 1990s

23 PRICES DE-AE export price ratios, for food and nonfood, tended to converge in 1960s-70s but have diverged since [Figure 4B]. Price divergence during the period of liberalization suggests: EITHER policy shifts have been asymmetric (not plausible) OR much North/South agricultural trade is complementary

24 110 Figure 4B: Agricultural Price Convergence (DEs relative to AEs) Food Exports Agr. Non-Food Imports All Agri. Exports s 1970s 1980s 1990s

25 Understanding Agricultural Globalization RICARDIAN ADVANTAGE AE have an absolute productivity growth advantage in all sectors [Table 5] but comparative advantage in AG while DE seem to have a comparative advantage in both industry and services. Also, there is productivity divergence in all sectors over time, more so for AG. Thus, DE s comparative disadvantage in AG rising over time. Perhaps, this accounts for their declining selfsufficiency. It implies that further liberalization will hurt DE AG.

26 Table 5: Labour Productivity Trends and Relatives 1960s 1970s 1980s 1990s Trend Growth Rates DEs Agriculture Industry Services Total Non-agricultu AEs Agriculture Industry Services Total Non-agricultu Average Labour Productivity Levels (US$, 1980 prices) DEs Agriculture Industry 4,583 5,537 5,264 5,049 Services 2,898 3,379 3,484 3,325 Total 1,280 1,643 1,876 2,013 Non-agricultu 3,637 4,322 4,256 4,061 AEs Agriculture 1,842 3,060 4,283 5,797 Industry 11,913 14,462 16,641 18,806 Services 11,227 13,052 14,832 17,058 Total 9,499 11,898 14,113 16,488 Non-agricultu 11,501 13,568 15,440 17,578

27 HEKSCHER-OHLIN ADVANTAGE DE are supposed to have advantage in labor-intensive AG. So in H-O view, declining DE self-sufficiency must be due to AE trade promotion. And AG liberalization will raise DE incomes & AG output, and (rather ambiguously) lower poverty. IMPLICATIONS Opening up DE AG with only partial dismantling of the protective-promotional regime in AE can hurt DE, majority of whom are not net exporters of food AG GDP growth is inversely correlated with elasticity of AG labor absorption [Figure 5]. AG globalization poses a potentially serious threat by forcing AG to shed labor faster than it can be absorbed elsewhere (e.g., Mexico under NAFTA) Prospects for raising AE food supply and demand depends on growth of domestic AG

28 Main Conclusions AG.Trade/GDP grew for both DE and AE Rate of growth in integration highest in 1990s But declining DE AG trade balance: import ratio rising and export ratio falling Fall in AG growth rates and AG productivity growth rates (for both DE and AE) DE absolute productivity levels diverged from AE absolute productivity levels DE comparative productivity lower in AG and declining

29 No evidence of price convergence between DE and AE either policy shifts have been asymmetric or much North/South agricultural trade is complementary "Fallacy of Composition": DE ToT losses significant (though not just agricultural) Demand-side future: threat of higher food prices for all food-deficit DE and households Supply-side future: reduced organizational & fiscal means to provide agricultural inputs

30 3. Interpretations, Benefits & Costs

31 The Rationale for Globalizing Agriculture FAO argues that policy bias against agriculture within DE plus AE protection and subsidization of AG are the key causes of AG underdevelopment As a result, AE output is higher and DE output lower. But on balance, FAO maintains, these policy regimes lowered world prices. Hence, trade expansion from liberalization will raise world prices but raise DE supplies. AG producers everywhere in the DE, mostly poor, will benefit.

32 Structural Constraints & Uneven growth Structural Features of DE-AG Low AG productivity explains both low AG supply and low AG demand. The AG price is critical for the poor and also for macroeconomic performance. Q1 How large are Static Gains from Free Trade? ALLOCATION For `typical parameters, allocative gains from free trade are only 3% of GDP DISTRIBUTION Consumers lose 13%, producers gain 21%, government revenue declines 5% POVERTY These redistributions may be inequitable, raise poverty & food insecurity. Though AG is labor-intensive, real wages may fall as food prices rise

33 Q2 Will Free Trade work against Dynamic Growth in agriculture? 1. INDUSTRIAL IMPERATIVE DE with a higher share of primary exports grow more slowly because due to low income elasticities, primary terms of trade (TOT) tend to decline world price instability means payments instability causing stop-go growth prior industrial base helps secure increasing returns and external economies 2. PREBISCH EFFECTS Past policies reduced DE AG import prices and raised export prices. So reversal of policies will mean DE AG TOT loss

34 3. NON-TRADEDS Free trade openness will hurt DE AG non-traded, mainly wage foods (a large share of agriculture is effectively non-traded) 4. RISKS Some shelter against volatile world prices can be a good bargain (insurance) even if average prices are lower. So free trade may hurt farmers 5. FISCAL IMPACT Liberalization reduces the indirect fiscal take from AG and so reduces public investment in agricultural supply shifters 6. MACRO IMPACT Internal AG/IND TOT influence distribution and effective demand. Trade opening, by raising AG prices, reduces effective demand, output and budget, and so growth

35 Doha Round: Theses & Anti-Theses 1 AG in Doha Round: Important for DE or Not? o For the vast majority of WTO members, the agriculture talks are by far the most important issue in the Doha global trade round. Financial Times, The so-called Development Round was largely initiated by the Cairns Group (with the US in the background) & the EU, though their interests (chiefly agricultural) are at loggerheads. The far more important development issues {TRIPs, industrial tariffs, implementation instruments} have run up against a stone wall (with the US in the foreground). Meanwhile, AE Singapore demands hang around like Damocles sword over the heads of the DE So the FT statement is wildly off the mark so far as DE interests (construed broadly) are concerned.

36 2 Doha Prospects: Pessimism or Skepticism? o If we don't see some compromise [on the AG impasse], I'm afraid the [entire Doha round] could collapse. We need a deal." P Townsend, Canadian Agri-Food Trade Alliance, Our analysis warrants skepticism about DE gains on the AG front. It also indicates that DE ought to be concerned about signing on to liberalizing losses. Deardorf et al. estimate world annual welfare gain from UR of $75 b and of $ 613 b from an assumed 33% reduction in all restrictions. These are small fractions of world GDP. Even on the neo-liberal model, DE have, and will, garner minuscule fractions of these fractions.

37 3 Is AG Free Trade a North/South Issue Or Not? o Unlike many other issues, agricultural trade liberalization is not a North/South Issue. Briefing Paper on Agricultural Liberalization, SAWTEE, Kathmandu, Nepal, April This claim makes too much of the conjunctural non-congruence of interests among DE and too little of their structural congruence. The Prebisch doctrine retains its significance. Indeed, its reach has widened. So this claim is based on a serious lack of understanding of the world trading system.

38 4 Free Trade or Policy Autonomy? o Brussels is under intense pressure to axe export subsidies which depress global food prices and impoverish farmers in the developing world. L. Elliott and C. Denny, The Guardian, On the one hand, this makes too little of the power of FOOD prices to impoverish food-deficit households (including perhaps a majority of DE farmers) and too much of the power of prices as food supply shifters. On the other hand, it ignores the power of public investment as a supply shifter which has been gravely weakened precisely because trade liberalization has reduced DE fiscal resources.

39 On the third hand (two don t suffice), it also misses the immiserizing effects that give-and-take AG liberalization between North and South will induce by stimulating the South s NON-FOOD exports. CONCLUSION The trade-development nexus is far removed from the simple and `monotonic neo-liberal view of it. It supports case for policy autonomy: a recognition that playing fields are not level and one size does not fit all at all stages of development. If Doha is to be a genuine Development Round, it must systematically focus on Special & Differential Treatment provisions (to take just one example, relaxing the ubiquitous tarrification of quotas).

40 The Case of Southern Coffee By the late 1990s Viet Nam became the second biggest coffee exporter and some 4 million Vietnamese were dependent on coffee to make a living. It was one of the country's most valuable exports, earning up to $600m a year. When the world coffee price peaked in 1994 some Vietnamese saw their incomes increase dramatically. Then the world price collapsed (not least because of the rapid growth of Vietnamese coffee production, amply encouraged and supported by the World Bank). The price has fallen by almost 50 per cent in the past 3 years to a 30-year low. Some 25 million coffee producers in the South confront ruination of their livelihoods. Farmers sell at a heavy loss but branded coffee continues to reap a hefty profit in the North.

41 The Case of Mexican Maize There are about 3 million Mexicans who farm corn and support roughly 15 million family members. Since NAFTA took effect eight years ago, imports of corn into Mexico from the US have increased nearly eighteenfold, according to the US DoA. Roughly a quarter of the corn in Mexico is now imported from the United States. The imports will probably keep growing for the next six years as the final phases of NAFTA take effect. In the long run, Mexicans are supposed to become better off. But even in the standard model, this cannot be true for all Mexicans. It just so happens that free trade s losers are the poorest Mexicans a whole generation of them. Free trade AND Mexico's own farm policies threaten the ability of Mexican farmers to continue to grow corn.