Trade, agriculture, food security and biodiversity


SDG indicators
SDG target 2.b: Correct and prevent trade restrictions and distortions in world agricultural markets, including through the parallel elimination of all forms of agricultural export subsidies and all export measures with equivalent effect, in accordance with the mandate of the Doha Development Round
SDG indicator 2.b.1: Agricultural export subsidies


SDG target 2.c: Adopt measures to ensure the proper functioning of food commodity markets and their derivatives and facilitate timely access to market information, including on food reserves, in order to help limit extreme food price volatility
SDG indicator 2.c.1: Indicator of (food) price anomalies

Goal 2 of the 2030 Agenda sets out to “End hunger, achieve food security and improved nutrition and promote sustainable agriculture”. As with other SDGs, realising this goal will require a multifaceted approach. One part of the equation is the necessity for properly functioning food commodity markets. Ensuring that markets around the world have access to all food products requires international trade and cross-border co-operation. In the context of climate change, with growing risks for predictability of harvests and uncertainty regarding the sustainability of many regional crops, the importance of trade in food commodities may well increase rather than diminish.

Two targets belonging to SDG 21 deal with the proper functioning of food markets. First, target 2.c sets out to limit or reduce price volatility through better access to market information. Second, target 2.b aims to avoid market distortions by eliminating export subsidies and equivalent measures. Co-operation via multilateral trade thus has an important role to play in order to alleviate hunger, and complementing other efforts, such as increasing ODA and OOFs to the agricultural sector (see Official support for sustainable development).

Changing trends in agricultural markets

The value of food trade has more than tripled since 2000, reaching US$1.5 trillion in 2017, up from US$426 billion in 2000. Driven by improvements in market access, innovation, economic and population growth, agricultural trade demonstrated stronger resilience than fuel and manufactured goods since the 2008 global financial crisis until 2016. In 2017, the market presents a strong improvement in the different sectors (see figure 1).

Figure 1. Growth of world GDP and merchandise exports by product groups
(Percentage)

Source: UNCTAD (2019a).
Notes: For more details on the classification of commodities, see UNCTAD product classification.

Robust demand for food and feed, growth in biofuel production and declining stock-to-use ratios have given rise to structural changes in global agricultural markets. Changing export patterns underscore the increasingly central role of emerging markets in global agricultural trade. While developed economies such as the United States and EU still dominate international trade flows (see table 2 and table 3), developing economies have increased their prominence in the share of total agricultural exports and imports. Between 2000 and 2016, their share of exports and imports rose by 8.2 and 7.9 percentage points respectively (see table 1). In contrast, developed economies have experienced a significant fall of over 10 percentage points in both imports and exports, illustrating the growing shift in influence towards emerging markets.

Table 1. Shares of the 20 major exporters and importers in total agricultural products
(Percentage)

 Major exporters shares
in total agricultural products
Change
20002016
ExportsDeveloped economies70.760.3-10.4
Developing economies20.228.48.2
ImportsDeveloped economies68.158-10.1
Developing economies16.724.67.9
Source: UNCTAD calculations based on FAO (2018).
Note: Major exporters or importers represent around 90 per cent of total exports or imports of agricultural products in 2000 and 2016.

Notably, China now ranks as the fourth major exporter of agricultural products with their share of world imports increasing more than threefold – a growth in market share of 8.2 per cent between 2000 and 2016. The dramatic increases in export shares enjoyed by Brazil, India and Indonesia can be attributed to agricultural productivity growth.

Table 2. Top 10 importers of agricultural products
(Share in total value of imports)

Economy2000
Share in total value of imports
European Union45.3
United States of America10.1
Japan8.7
Canada2.8
Mexico2.3
China2.3
China, Hong Kong SAR2
Republic of Korea2
Russian Federation1.7
Saudi Arabia1.2
Economy2016
Share in total value of imports
European Union39.1
United States of America10.1
China8.2
Japan4.2
Canada2.7
Mexico2.0
China, Hong Kong SAR1.9
India1.9
Republic of Korea1.9
Russian Federation1.9
Source: UNCTAD calculations based on FAO (2018).
Table 3. Top 10 exporters of agricultural products
(Share in total value of exports)

Economy2000
Share in total value of exports
European Union46.9
United States of America14
Canada3.9
Australia3.7
Brazil3.2
China3
Argentina2.7
Mexico1.9
New Zealand1.6
Thailand1.5
Economy2016
Share in total value of exports
European Union41.1
United States of America11
Brazil5.7
China4.2
Canada3.4
Argentina2.8
Australia2.5
Indonesia2.4
Mexico2.3
India2.2
Source: UNCTAD calculations based on FAO (2018).

Agricultural export subsidies are vanishing

Agricultural export subsidies more than halved in the five years from 2010 to 2015. The 2015 Nairobi package (WTO, 2019a)2 has further strengthened WTO members’ commitment to abolish trade-distorting subsidies in agricultural markets. The impacts of these policies have led to improved market access for developing economies that have instigated structural changes to access global agricultural markets. Spikes in food prices combined with low agricultural commodity prices have increased governmental pressure to remove trade distorting protectionist policies that may not be captured by traditional export subsidy outlay measures alone. Hence, broader and more comprehensive monitoring of trade barriers may be required to achieve the ambitions of SDG 2.

Export subsidies are among the policy instruments that distort trade the most. These subsidies were originally intended to aid domestic producers and farmers in areas where agricultural production costs were high and to ensure the production of enough food to meet domestic needs. Agricultural export subsidies are a form of government intervention with the purpose of modifying a country’s terms of trade. They protect producers from international market competition; i.e., economies where the costs of production, such as labour or land, are cheaper. As such, subsidies may have many spillover effects for the global economy where they can exacerbate price volatility and food price spikes. They allow exporters to gain market share without efficiencies that should accompany such growth.

Since 1999, the Agreement on Agriculture (WTO, 2019b) has placed limits on export subsidies in order to prevent the disposal or dumping of surplus commodities on global agricultural markets. Following the 2015 Nairobi Ministerial Conference, WTO members have taken steps to phase out export subsidy entitlements from their WTO schedule of commitments in order to level the playing field between developed and developing economies. Apart from few selected agricultural products, developed countries have agreed to remove export subsidies with immediate effect, and most developing countries have agreed to do so by 2018.

However, developing countries will retain the flexibility to cover marketing and transport costs for agriculture exports until the end of 2023, while the poorest and food-import dependent developing countries will be granted more time to reduce export subsidies (WTO, 2019c). While the Nairobi decision aims to prevent trade distortions using other export policies, such as export finance, international food aid and operations of agricultural exporting state trading enterprises, the sustained fall in global food prices has recently cast doubts over the political feasibility of implementing agricultural reform at domestic level.

Figure 2. Notifications to WTO of export subsidy outlay (SDG 2.b.1)
(Left axis: Millions of US$; right axis: index, nominal average 2002-2004=100)

Source: WTO (2019a).

Strengthened by the WTO adoption of Nairobi Package, there has been a sustained downward trend in export subsidy outlays notified to the WTO over the past decade. As shown in figure 2, agricultural export subsidies have more than halved between 2010 and 2015 despite falling food prices. Total subsidy outlays have fallen from US$434 million in 2010 to less than US$200 million in 2015, with developed economies accounting for the vast majority of this reduction (US$179.2 million).

While domestic support in agricultural markets has declined in the more advanced economies since the Agreement on Agriculture in 2000, some emerging and developing economies experiencing income growth have introduced measures to support their domestic agricultural markets, including the use of trade-distorting measures (FAO, 2018). Map 1 below shows that India implemented the largest number of harmful export subsidy policies, followed by the United Kingdom (UK) and the EU which implemented considerably lower interventions, with six and five, respectively.

Map 1. Trade restrictive export subsidy interventions by country, 2008 - 2018
Economies

Other intervention measures

Figure 3 shows the trend in the number of state interventions implemented in agricultural markets between 2008 and 2018. These data by the Global Trade Alert (2019) systematically document trade-discriminatory and trade liberalizing measures with the former only including measures certain to “discriminate against foreign commercial interests”.3

Figure 3. Restrictive measures in agricultural markets
Source: UNCTAD calculations based on data from Global Trade Alert (2019).
Note: ‘Other interventions’ mean ‘Other restrictive interventions’.

The number of what are termed harmful interventions implemented, i.e. those that discriminate against foreign commercial interests, peaked at 268 in 2015, of which only 10 were export subsidies. Following the 2015 Nairobi package (WTO, 2019a)2, few trade restrictive export subsidy policies have been implemented in agricultural markets each year. However, in recent years while the number of harmful interventions has reduced somewhat, they remain high, averaging around 200 state enactments per year.

Figure 4. Agricultural interventions by policy instrument, 2008 -2018
Source: UNCTAD calculations based on data from Global Trade Alert (2019).

The data presented in figure 3 demonstrate a reduction in the use of export subsidies. However, figure 4 shows that export subsidies only constitute 2 per cent of policy instruments employed in the agricultural market , with import tariffs and export quotas making up 42 and 10 per cent of harmful interventions in agricultural markets, respectively. From mid-October 2015 to mid-May 2016, 154 restrictive trade measures were applied by WTO members – the highest monthly average since 2011 (WTO, 2016). Furthermore, a fifth of all trade measures implemented between 2012 and 2015 targeted agricultural products. These measures have coincided with food price spikes and episodes of volatility in agricultural commodity prices. Research suggests this environment of volatile agricultural prices has created a circularity, leading to a resurgence of isolating trade policies, including a shift towards more government subsidies and market access protection (Bellmann and Hepburn, 2017).

Price information is valuable but lacking

Spikes in food prices are strong indicators of potential threats to food security. Higher food prices can deny low-income families access to sufficient and nutritious food. UNCTAD has long called for increased transparency and tighter regulation of commodity markets to help avoid speculative bubbles (UNCTAD, 2012). Applying these initiatives in commodity food markets can contribute to food security.

At the same time, abnormal food prices are valuable warning signs, signalling the need for action. Prices can be observed, easily and frequently, and carry broad information about recent changes in supply and demand as well as signals about expectations and risks for future food markets (Kalkuhl et al., 2016).

The FAO collects and disseminates food commodity prices via the Food Price Monitoring and Analysis database, including price warnings (FAO, 2019a4; Baquenado, 2015). Methodologies to identify abnormal prices for five cereal products as part of SDG indicator 2.c.15 have been developed but data is not consistently collected and reported (United Nations, 2019; FAO, 2019b).

Food price anomalies and volatility are often combined with losses in agricultural income, climate extremes, reduced food access and extreme changes in the quantity, quality and diversity of food consumed (FAO, 2018). The episodes of high food price volatility pose a major threat to food access, especially in developing economies, and LDCs. And these episodes are expected to become more frequent, with the rising number of extreme climate-related events (see Figure 5).

In their analysis of the relationships between conflicts, food price and climate across Africa, Raleigh et al. (2015) find that (i) higher rates of conflict are expected in markets with higher food prices; (ii) violence raises the average price of commodities in markets; (iii) anomalously dry conditions are associated with increased frequencies of conflict; and (iv) decreased rainfall exerts an indirect effect on conflict through its impact on commodity prices.

Figure 5. Number of extreme climate-related disasters in LDCs
Source: UCL-CRED and Guha-Sapir (2019).
Notes: Occurrences entered into the Emergeny Events Database. An event is entered as a disaster if it meets at least one of the following criteria: 10 or more people dead, 100 or more people affected, the declaration of a state of emergeny, or a call for international assistance.

UNCTAD work on trade in biodiversity-related products

As a response to the 2030 Agenda, UNCTAD’s BioTrade Initiative – which has been fostering trade as an incentive for biodiversity conservation and improved economic and social welfare, particularly in developing countries for over two decades – has been amplifying its efforts to encourage sustainable trade activities. In 2007, UNCTAD developed the BioTrade Principles and Criteria (UNCTAD, 2007) which encompasses environmental, social and economic sustainability principles and criteria. These P&C are the cornerstone work of BioTrade to guide the collection, production, transformation and commercialization of products and services derived from biodiversity. UNCTAD and BioTrade partners focus on creating an enabling environment for BioTrade businesses to flourish and enhance their capacities for sustainable sourcing, access and benefit sharing and trade in value-added products and services.

BioTrade is being implemented in over 50 countries in Asia, Africa, the Americas and Europe in sectors such as personal care, phytopharma, food, fashion, ornamental flora and fauna, handicrafts, textiles and natural fibres, sustainable tourism, and forestry-based carbon credit activities (UNCTAD, 2016). As of 2017, sales by BioTrade companies and initiatives amounted to US$4.8 billion showing a very significant increase from US$40 million in 2003. The UEBT – a spin-off of UNCTAD which promotes private sector engagement in BioTrade and UEBT standards – works with over 300 supply chains, and with almost half of the ingredients sustainably collected in the wild, a number of which are listed under CITES Appendices II and III (CITES Secreteriat, 2017; pers.comm. UEBT, 1 April 2019). Megadiverse countries such as Peru, which is home to around 10 per cent of the worlds plant species, have great potential to develop activities based on their rich biodiversity (SERNANP, 2019). During 2013-2017, Peruvian exports of its top 14 biodiversity products increased significantly from US$300 million to more than US$450 million. Many of these products, such as quinoa, maca, golden berry, achiote, Brazil nut, purple corn, giant maize from Cuzco, lucuma are being promoted by BioTrade (pers.comm. PromPeru 2018).

The growing demand among global consumers for natural and environmentally-friendly products continues to offer growing opportunities for BioTrade. For example, in the United States of America, consumer sales of natural, organic and healthy products are forecasted to expand from US$153 billion in 2013 to US$252 billion by 2019 (NEXT et al. 2016). According to a global survey conducted by UEBT, 79 per cent of global consumers also think that companies have a moral obligation to have a positive impact on biodiversity. Against this background, UNCTAD, with the support of the Swiss State Secretariat for Economic Affairs SECO, launched the Global BioTrade programme: Linking trade, biodiversity and sustainable development (2018-2022). The programme supports stakeholders to seize and capitalize on the trade opportunities arising from linking biodiversity and sustainable development, thereby advancing the implementation of SDGs, particularly SDGs 12, 15 and 17. UNCTAD and partners will also actively contribute to the preparations of the post-2020 global biodiversity framework, particularly by sharing lessons learned, best practices and case studies that demonstrate the positive contribution of BioTrade to the conservation of biodiversity and the livelihoods of rural communities (UNCTAD, 2019c).

Notes

  1. SDG 2: end hunger, achieve food security and improved nutrition and promote sustainable agriculture.
  2. The Nairobi package contains a series of six Ministerial Decisions on agriculture, cotton and issues related to LDCs.
  3. It is important to note that the number of interventions does not necessarily represent the proportional impact of exports affected by them.
  4. FAO presents the countries where prices of one or more basic food commodity are at abnormally high levels in main markets on this dedicated website.
  5. SDG indicator 2.c.1: Indicator of food price anomalies.

References

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