INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

IFPRI

Agricultural Negotiations, Food Security, and Poverty

Eugenio Díaz-Bonilla

International Food Policy Research Institute

Presentation at the meeting of the EU-LDC Network

Rotterdam, May 30 and 31, 2001

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Heterogeneity

Net Trade Position• NFIM 105 (48, 35, 22) NFEX 43 (15, 17, 11)• NAIM 85 (30, 32, 33) NAEX 63 (33, 20, 10)

(Valdes and McCalla, 1999)

Direction of trade Africa to EU LAC, USA, and EU Asia to Asia

Types of Products Food Security: 12 clusters

(Diaz-Bonilla, Thomas, Robinson and Cattaneo, 2000)

Structure and Evolution of Production

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Is Agriculture Special?

Debate on multifunctionality• Other sectors; jointly produced; adequate

policy interventions?• Developing countries: different positions.

Whose multifunctionality? What multifunctionality? For developing countries main issues:

rural development, poverty reduction or elimination, food security, and environmental sustainability.

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Food Security, Nutrition Security and Trade

Art. 20 and Preamble of Agreement on Agriculture refer to non-trade concerns, including food security.

Two related questions:• Categories of countries under WTO rules:

are they adequate for analyzing food security?

• WTO disciplines and Special and Differential Treatment linked to those categories: are they adequate to address food security concerns?

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GLO

BA

L

NA

TIO

NA

L

HO

US

EH

OLD

AN

D IN

DIV

IDU

AL

IND

IVID

UA

L

Global Food Availability

National Net Imports of Food

National Food Production

National Food Availability

Household Incomes

Household Food Access

Food Security Care Health Other Basic Needs and

Nonnecessities

Nutrition Security

Growth, Employment Distribution,

Poverty

Government Revenues

Trade

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Cluster Analysis Variables

• Calories per day per capita• Proteins per day per capita (grams)• Food production per capita (US$ 1989-91)• Total exports (merchandise and services) over food

imports • Non agricultural population over total population

167 countries; 155 WTO (132 members and 23 observers); 43 LDCs; 19 NFIDCs

Levels, standardized (z-scores) Three methods: hierarchical, k-means,

and fuzzy

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IFPRISUMMARY CALCAP PROTCAP PRODCAPEXPTOIMP URBPOPClust.1 1994.5 48.6 85.3 5.4 0.18 0.2Clust.2 2572.9 67.8 148.9 9.7 0.10 0.6Clust.3 3147.9 94.7 307.0 24.2 0.04 0.9Clust.4 3373.4 108.0 1090.2 31.0 0.03 0.9

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-1.00 -0.50 0.00 0.50 1.00 1.50 2.00

xtlmfood

-1.00

-0.50

0.00

0.50

1.00

1.50

1

23

45

6

7

8

9 10

11 12

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Typology LDCs better job at identifying food

insecure. But some food insecure not included and some food neutral included

NFIDCs not as good as indicator of food insecurity (~40% trade neutral)

Need to define better categories? Take -0.5 in standardized variable as

cutting point• 2380 Calories and 62 grms. proteins for

consumption insecure (FAO data)• 13% IMFOOD/TOTEXP for trade stressed

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Table 9--Index of War Intensity 1970-1995

Clusters War Index

Cluster-1 10.87

Cluster-2 1.27

Cluster-3 1.24

Cluster-4 2.29

Cluster-5 0.64

Cluster-6 0.11

Cluster-7 1.54

Cluster-8 0.14

Cluster-9 0.00

Cluster-10 0.00

Cluster-11 0.00

Cluster-12 0.00 Note: Index measured as war-related death over total population during the period 1970-1995, and then normalized as a proportion of the mean of all countries with conflicts.

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Trade and Food Security

Consumption per capita has increased on average, but there are exceptions (~ 1/4 countries less than 1960s)

Consumption is less variable than production

Total exports earnings expanded more than food import bill.

Price variability seems lower.

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0

0.05

0.1

0.15

0.2

1961196519691973197719811985198919931997

World Dving-Ch-Ind

Food Imports over Total Exports

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0

0.1

0.2

0.3

0.4

1961196519691973197719811985198919931997

LIFDC-Ch LDC SS Africa

NFIDC Dving-Ch-Ind

Food Imports over Total Exports

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Least Developed Countries

0

5

10

15

20

25M

illio

ns

Food Imports

Total Exports

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Calories per capita per day

1600

1800

2000

2200

2400

2600

2800

Cal

orie

s

SSA Dvng LDC LIFDC NFIDC

Table 17 Coefficient of Variability for Price: constant value

1960-1999 1990s 1995-1999Cocoa (cents/kg) 0.54 0.14 0.13Coffee Mild (cents/kg) 0.40 0.29 0.21Coffee Robusta (cents/kg) 0.55 0.26 0.14Tea (cents/kg) 0.20 0.19 0.21Sugar (cents/kg) 0.81 0.16 0.17Orange ($/mt) 0.11 0.08 0.01Banana ($/mt) 0.11 0.12 0.11Beef (cents/kg) 0.21 0.13 0.06Wheat ($/mt) 0.22 0.14 0.16Rice ($/mt) 0.34 0.13 0.07Maize ($/mt) 0.21 0.16 0.17Sorghum ($/mt) 0.21 0.13 0.15Coconut Oil ($/mt) 0.36 0.29 0.15Soybean Oil ($/mt) 0.30 0.18 0.13Groundnut Oil ($/mt) 0.28 0.15 0.08Palm Oil ($/mt) 0.30 0.29 0.19Soybean ($/mt) 0.22 0.11 0.12Soybean Meal ($/mt) 0.27 0.16 0.21Cotton (cents/kg) 0.19 0.14 0.12

Source:Authors' calculations based on FAOSTAT (2000)

Table 18 Volatility for food production1961-2000 1991-2000 1995-2000

Asia 0.150 0.100 0.050Africa 0.110 0.080 0.060LAC 0.110 0.080 0.050EU 0.060 0.040 0.030Japan 0.050 0.040 0.030US 0.050 0.040 0.020Source: Authors' calculations based on FAOSTAT (2000)

Table 19 Volatility for calories consumption1961-2000 1991-2000 1995-2000

Asia 0.051 0.030 0.012Africa 0.056 0.031 0.014LAC 0.041 0.022 0.010EU 0.023 0.016 0.007Japan 0.012 0.004 0.001US 0.014 0.006 0.005Source: Authors' calculation based on FAOSTAT (2000)

Table 20 Volatility for protein consumption1961-2000 1991-2000 1995-2000

Asia 0.057 0.034 0.019Africa 0.063 0.038 0.020LAC 0.055 0.037 0.017EU 0.024 0.017 0.008Japan 0.020 0.007 0.008US 0.022 0.006 0.002Source: Authors' calculation based on FAOSTAT (2000)

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Is the AoA Framework Adequate?

Criticisms because of the imbalances between industrialized and developing countries. Valid criticism.

Criticisms because of the inadequacy of the AoA to address issues of importance for developing countries? • Cost money, difficult to implement?• Development box? Food safety box?• Do not ask for what you may already have

or what you cannot pay

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Trade, Growth and Poverty

Trade and Exports associated with higher growth rates

Constraints?• Agricultural protectionism in industrialized

countries.Market accessEliminate export subsidies and similar practicesControl domestic support

• Agricultural and trade policies in developing countries.

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Protectionism in Industrial Countries

Existing preferential arrangements and differentiated impacts on developing countries.

Increase the percentage of the quota rent that goes to developing countries.

Transform value of trade preference to aid in cash.

Net importersFinancial facilities, food aid in cash,

countercyclical, targeted

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Trade and Poverty Poverty decreases with high, stable, inclusive

and sustainable growth. Trade helps or harms?

• Level: open economies seem to grow faster, but how to define open?

• Stability: open or closed economies more unstable?• Inclusiveness: Competitive advantage and more

labor intensive? Can small farmers compete? Reinforcing powerful economic agents?

• Export/cash crops versus staple crops?• Impact on women? Traditional crops, land tenure;

new crops, wages. Time to care for children • Impact on environment?

Outward orientation and complementary policies• Does AoA constrain needed policies? It does not

seem to be the case. Article 6.2.

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Agricultural policies in developing countries

High prices for producers vs low prices for consumers. Old conflict in agricultural policies.

Developed countries make consumers and taxpayers pay producers. Developing countries historically kept agricultural prices low for urban population and industrialization. And now? Lack of definition, affecting domestic policies and trade positions.

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Old Conflict (cont.) Perspective of poor producer (multiplier

effect of agriculture). But poor consumers (poor net food buyer >50% of incomes, urban malnutrition)? No way out of this policy dilemma.

Poverty alleviation and protection: tax on food, with the greater burden falling on poor consumers and larger percentage going to large producers

General equilibrium effects of protection: other sectors hurt; employment; exports

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Old Conflict (cont.)

There is still a need for instruments to protect from import surges. Avoidance of drastic shocks that imperil survival strategies of the poor.

Poor countries may ask industrialized countries to reduce protection to their levels.

Negotiate from bound tariffs

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Alternatives in the AoA

Green box: food safety stocks, domestic food aid.

Article 6.2. Safeguards: special expanded or

new ones? No export bans/taxes.

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Additional Issues

Adequate indicators to identify countries.

Disasters and wars. Special consideration when consumption falls below some pre-specified levels

International food aid:counter-cyclical, cash form, and targeted.

Burden of regulations as % of GDP (SPS).

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Trade and Food Security: Some Conclusions

Food security is largely a domestic issue:• Availability (domestic supply and trade),• Access (broad-based development), and• Utilization (health, education, women

empowerment, democracy). Food security as perceived by poor

countries is different from trade concerns as articulated by developed countries. Mixing completely different notions does not help poor countries.

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Trade and Food Security: Some Conclusions

Adequate policies.• Focus on small farmers and the poor.• Investment in human capital and

infrastructure. • Technology and extension.• Land ownership by small producers and

landless workers.• Community organization and political

participation. • Adequate functioning of product and

factor markets.• Macroeconomic stability.• Good governance.

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Conclusions: WTO Negotiations

Define better categories with objective indicators.

Address the issue of agricultural protectionism in developed countries.

Some changes in language in the AoA.

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Conclusions: WTO Negotiations

But the main issues are not legal texts and language. The problem is financing for rural development, food security and poverty alleviation:• To implement a better operating and

integrated food system.• To establish more creative forms of

safety nets utilizing world capital markets.

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Other Global Problems

Financial instability and debt problems.

Heavily indebted poor countries initiative (HIPC).

War and conflict.

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50

150

250

1961196519691973197719811985198919931997

real income index real agr.price

Price and Income Indices

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Exports to LDCs and LICs

1995/96 USA EU Wheat LDCs 4% 20% LICs 15% 28% Coarse Grains

LDCs 1% 1%

LICs 1% 1%

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0

0.1

0.2

0.3

1961196519691973197719811985198919931997

NFIDC Dving-Ch-Ind NFIDC Adj.

Food Imports over Total Exports

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LIFDCs (w/o China)

0

50

100

150

200

250

300M

illio

ns

Food Imports

Total Exports

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Figure 1. Food Security Profile in the 4-cluster Sequence

-2

-1

0

1

2

3

4

5

6

CALCAP PROTCAP PRODCAP EXPTOIMP URBPOP

Indicators

clus

ter c

ente

rs (z

-val

ue)

Clust4-1 Clust4-2 Clust4-3 Clust4-4

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Issues For Discussion

WTO: key instrument for developing countries to bring the rule of law to trade issues.

AoA does not constrain good policies that genuinely address poverty and food security issues (programs aimed at poor producers or consumers, stocks for food security, and domestic food aid for populations in need).

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Issues for Discussion

Under the AoA, countries must make serious efforts to structure well-defined programs for poverty, food safety, and environmental protection.

Poor producers helped by the disciplines on subsidized exports.