Trade – a key ingredient to food security

Goal 2 of the 2030 Agenda is to “End hunger, achieve food security and improved nutrition and promote sustainable agriculture” and the targets set out to do this by 2030. As with other SDGsSustainable Development Goal, realizing this goal will require a multifaceted approach. Ensuring that markets around the world have access to nutritious food requires international trade and cross-border cooperation. With climate change threatening predictability of harvests and the sustainability of many regional crops, the importance of trade in food commodities is likely to increase. The Bridgetown covenant calls UNCTAD to pay special attention to the challenges of the commodity dependent developing countries, as well as net food-importing developing countries -—
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Two means of implementation targets for SDGSustainable Development Goal 2 refer to the proper functioning of food markets. Target 2.c is to limit or reduce price volatility through better access to market information. Target 2.b is to avoid market distortions by eliminating export subsidiesExport subsidies refer to the granting of support by governments to some beneficiary entity or entities to achieve export objectives. Export subsidiesmay involve direct payments to a firm, industry, producers of a certain agricultural product etc. to achieve some type of export performance. In addition, export subsidies may include low-cost export loans, rebates on imported raw materials and tax benefits such as duty-free imports of raw material. They can also take the form of government financed marketing. Most subsidies have existed in agriculture -—
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—-. and equivalent measures, as defined in the Doha Development RoundAlso called the Doha Development Agenda is a round of trade negotiations among WTO members launched in 2001 at the WTO’s Fourth Ministerial Conference in Doha, Qatar. A fundamental objective of the Doha round is to improve the trading prospects of developing economies. -—
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—-. A well-functioning global market for food plays a role in alleviating hunger, complementing other efforts, such as increasing ODAOfficial Development Assistance (ODA) are resource flows to countries and territories which are: (a) undertaken by the official sector; (b) with promotion of economic development and welfare as the main objective; (c) at concessional financial terms (implying a minimum grant element depending on the recipient country and the type of loan). In addition to financial flows, technical co-operation is also included -—
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—-. and OOFsOther official flows (OOF) are transactions by the official sector with countries and territories which do not meet the conditions for eligibility as ODA, either because they are not primarily aimed at development or because they do not meet the minimum grant element requirement -—
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—-. to the agricultural sector (see Development financing).

The goal to end hunger is falling further behind schedule

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—- estimates that 768 million people, or one in ten of the world’s population, was undernourished in 2021. Survey data show that 11.7 per cent of the world’s population experienced severe food insecurityFood insecurity is a situation where an individual cannot reliably access or afford healthy food. The FAO describes a moderately food insecure person as someone who cannot afford a healthy diet. has experienced uncertainty about the ability to access food and is likely to skip meals occasionally because of lack of resources. A severely food insecure person has at times run out of food and has during the last year gone a whole day without food. For SDG indicator 2.1.2, food insecurity is estimated based on survey data using the Food Insecurity Experience Scale developed by FAO. It consists of eight questions pertaining to whether the respondents or their families have reduced the quantity or quality of consumed food over the last 12 months because of lack of resources. -—
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—- in 2021 and an additional 17.6 per cent experienced moderate food insecurity (Figure 1). Food crises are playing out in 58 countries where a total 258 million people find themselves in situations with increased mortality and morbidity, and in urgent need of assistance. Indicators of hunger have been rising over the last five years. This rise, coupled with decreasing aid, has left the effort to alleviate acute hunger severely underfunded. The funding available per person in a food crisis shrunk by 30 per cent from 2017 to 2021 -—
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Conflicts and weather extremes drive many food crises and the increase of both contribute to increases in indicators of hunger. But people also face hunger when they simply cannot afford food in appropriate quantities and quality. Economic shocks and high food prices are increasingly putting adequate nutrition out of reach for people with limited means -—
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Some economies are more resilient to food price shocks than others

Stable increases in prices give consumers and producers a theoretical chance to budget and plan, whereas volatile prices are more disruptive to the livelihoods of people on both sides of the market. Sharp rises in food prices between 2007 and 2008 and again in 2011 highlighted the need to develop methods to track price volatility as advance warnings of food crises -—
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—-. Prices carry broad information about recent changes in supply and demand as well as signals about expectations and risks with regards to future food supply. They can be observed easily and frequently -—
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—-. Abnormalities in food prices are, in themselves, strong indicators of potential threats to food security and provide valuable warning signs, signaling the need for action. Food prices are therefore carefully monitored by the GIEWSGlobal Information and Early Warning System on Food and Agriculture -—
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—- and the AMISAgricultural Market Information System -—
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—- which have been established as early warning systems to prevent outbreaks of food crises.

One in five economies experienced abnormally high food prices in 2020. This rate dropped to one in ten in 2021, but is likely to have risen again in 2022, as global food prices moved further upward (Figure 2). Changes in global food prices can produce food price shocks in an economy, but local challenges to supply also play an important role. The COVID-19COVID-19 is an infectious disease caused by the strain of coronavirus SARS-CoV-2 discovered in December 2019. Coronaviruses are a large family of viruses which may cause illness in animals or humans. In humans, several coronaviruses are known to cause respiratory infections ranging from the common cold to more severe diseases such as Middle East Respiratory Syndrome (MERS) and Severe Acute Respiratory Syndrome (SARS). The most recently discovered coronavirus causes coronavirus disease COVID-19 -—
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—-. pandemicCommonly described by the WHO as ‘the worldwide spread of a new disease’, no strict definition is provided. In 2009, they set out the basic requirements for a pandemic: • New virus emerges in humans
• Minimal or no population immunity
• Causes serious illness; high morbidity/mortality
• Spreads easily from person to person
• Global outbreak of disease.
The US Centre for Disease Control uses a similar approach, but with a reduced set of criteria. It is very difficult to gauge whether the spread of a disease should be termed an outbreak, epidemic or pandemic. In other words, when to declare a pandemic isn’t a black and white decision -—
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—-. and the war in Ukraine pushed food prices to historically high levels, disproportionally affecting countries and households already struggling -—
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—-. The recent rise in food prices has been coupled with a strengthening US dollar. This constitutes a double burden for net food-importing countries. International trade in open and transparent markets may alleviate the effects of shocks and, among the policy actions that the situation requires, -—
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—- recommends maintaining international markets open and accelerating transport and trade facilitation initiatives.

In a world with a calory surplus, most economies are net-importers of food

Globally, in pure calorie terms, there is enough food to feed the world. The average person living on the planet needs a minimum of 1830 kcal per day to avoid undernourishment and about 2360 kcal per day for optimal health. The food available per person in 2020 amounted to 2980 kcal per day, up from 2860 kcal in 2010 -—
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The various factors affecting food production are unevenly distributed across time and space, which means there are benefits of a diversified global market for food. Trade between regions and across country borders may help adjust to changing conditions affecting food production as result of climate change -—
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—-. A well-functioning global value chain across agro-food sectors opens up opportunities for producers in developing economies to contribute to economic development in their local community -—
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—-. The International Covenant on Economic, Social and Cultural Rights -—
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—- recognizes freedom from hunger as a fundamental right and states that the parties to the Covenant shall take measures to ensure that right, including by equitably distributing the world’s food supply.

The importance of food to individual economies’ import baskets varies considerably across countries. In 2017 to 2021, basic food¹ made up from as little as a couple of per cent of the total imports of an economy up to 44 per cent for Haiti. Basic food in merchandise imports exceeded 30 per cent also in Benin, American Samoa, Eritrea, Yemen and Somalia. The median was 12 per cent (UNCTAD calculations based on UNCTADstat -—
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—-).

Seven in ten economies import more food than they export. Subtracting exports from imports, the median net imports of basic food were 5 per cent of total merchandise imports in the period 2017–2021. South America is home to several net food-exporting countries, while many net importing countries are found in the Middle East and Africa, many of them LDCsLeast developed country (Map 1). Several SIDSSmall island developing states (SIDS) were recognized as a distinct group of developing countries at the Earth Summit in Rio de Janeiro in June 1992. More information on UNCTAD official page. also had a relatively big negative trade balance in food. The median net import of basic food among both SIDS and LDCs were 11 per cent of total imports.

The importance of keeping breadbaskets open

Trade helps countries, especially LDCs, to both increase the total amount of calories supplied but also diversify the food available for consumption -—
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—-. The war in Ukraine has put international trade in cereals in the spotlight, as Ukraine and Russia are major exporters of grains -—
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—-. Cereals and cereal preparations are an important part of the global trade in food – they make up 15 per cent of exported food in value terms. However, as affordable staple foods, they account for 45 per cent of the calories available to the world’s population. Other, more expensive food groups, especially fish and seafood, play a bigger role in the value of international trade than they do in calories supplied (Figure 3).

The type of cereal typically consumed in a country varies as well as the share cereals have in dietary energy supply. In the Central African Republic 15 per cent of dietary energy supply is covered by cereals, whereas they cover 72 per cent in Bangladesh. Globally, 18 per cent of the volume of cereals supplied are imports. However, many countries are especially vulnerable to market disruptions due to the importance of cereals in the diet combined with a heavy reliance on imports for the supply of cereals. In Yemen, Lesotho, Djibouti and Eswatini more than 50 per cent of the calories supplied came from cereals and more than 90 per cent of these cereals were imported in 2020 (UNCTAD calculations based on FAOFood and Agriculture Organization of the United Nations -—
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—-).

Because of the importance of the Russian Federation and Ukraine for the production and trade of food and fertilizers, the Black Sea Initiative -—
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—- that ensures that food can safely be transported out to the global food markets and the MoUMemorandum of Understanding between the Russian Federation and UN on Trade Facilitation -—
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—- are crucial. Developing economies and LDCs are those most dependent on further disruptions from the war being avoided -—
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—-. By end of May 2023, over 30 million tons of wheat, corn, and other foodstuffs had been exported under the Initiative -—
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Agricultural export subsidies are vanishing; market distorting policies are not

Many governments support domestic food production, for example to ensure sufficient supply of food or to protect farmers from weather extremes and other events outside of their control. However, this support can have a market distorting effect, specifically when the price paid to the producers is higher than that of the market -—
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—-. This can lead to overproduction in some regions while discouraging development of the agricultural sector in other regions of the world. Economies that do not, or cannot, provide this kind of support are at a disadvantage in international trade and risk becoming more food insecure as a result. Special attention has been given to export subsidies for agricultural products. These have been seen as having an especially distorting effect on international food markets -—
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The WTOWorld Trade Organization Agreement on Agriculture -—
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—- set limits on export subsidies that distort agricultural trade, and at the Nairobi Ministerial Conference, WTO members agreed to phase out remaining export subsidy entitlements to level the playing field between developed and developing economies. Apart from a few selected agricultural products, developed countries agreed to remove export subsidies with immediate effect, and most developing countries 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 -—
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—-

Notifications of agricultural export subsidies were between US$3 and 4 trillion in the early years of the 2000s, with the majority provided by the EUEuropean Union. Subsidies declined rapidly from 2005 and reached almost zero in 2021. Mauritius was the only country reporting any amount for 2021 (Figure 4).

Phasing out export subsidies was one part of the mandate for the Doha Development Round referred to in SDG target 2.b. This target also called for “substantial reductions in trade-distorting domestic support” -—
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—- and continued negotiations about the amount and pace of these reductions -—
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—-. WTO members are obliged to notify the WTO about all forms of domestic support for agriculture and to report price support measures and their amount (defined as the product of food production and the gap between producer and market price) -—
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—-. However, the only SDG indicator that tracks the progress on target 2.b is the amount related to notifications of export subsidies (Figure 4). OECDOrganization for Economic Cooperation and Development estimates positive market price support as the total of explicit and implicit transfers though policy measures creating a price gap. From 2019 to 2021, positive market price support in the OECD and eleven emerging economies was estimated to amount to US$317 billion per year. This value was equivalent to 8 per cent of gross farm receipts -—
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—- and 85 times higher than notified export subsidies at any time during the 2000s.

Notes

1. Basic food refers here to a category of food products that excludes beverages and tobacco, tropical beverages (such as coffee and tea) and spices. When SITC codes are used, the included codes are 0 - Food and live animals, 22 - Oil seeds and oleaginous fruits, 4 - Animal and vegetable oils, fats and waxes with the exclusion of 07 - Coffee, tea, cocoa, spices, and manufactures thereof. In the HSThe Harmonized System (HS) is an international nomenclature developed by the World Customs Organization, which is arranged in six-digit codes allowing all participating countries to classify traded goods on a common basis. Beyond the six-digit level, countries are free to introduce national distinctions for tariffs and many other purposes. classification a comparable set of products would be included in chapters 1-24 excluding 05 - Products of animal origin, not elsewhere specified or included, 06 - Live trees and other plants; bulbs, roots and the like; cut flowers and ornamental foliage, 09 - Coffee, tea, mate and spices, 13 - Lac; gums, resins and other vegetable saps and extracts, 14 - Vegetable plaiting materials; vegetable products not elsewhere specified or included, 22 - Beverages, spirits and vinegar, and 24 - Tobacco and manufactured tobacco substitute.

References

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