Trade, food security and sustainable agriculture

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, realizing this goal will require a multifaceted approach. To ensure 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 may well increase rather than diminish.

Two means of implementation targets for SDG 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 subsidies and equivalent measures, as defined in the Doha Development Round. A well-functioning global market for food plays a role in alleviating hunger, complementing other efforts, such as, increasing ODA and OOFs to the agricultural sector (see Official support for sustainable development).

The goal to end hunger is falling behind schedule

World hunger can be estimated in several ways. Based on average dietary intake per person and its variation in a country, FAO estimates the prevalence of undernourishment was one in ten of the world’s population. That is, 768 million people were undernourished in 2020. Survey data on experienced food insecurity, available from 2014 onward, show that 11.9 per cent of the world’s population experienced severe food insecurity in 2020 and an additional 18.5 per cent experienced moderate food insecurity. These numbers are all a clear increase from 2019 (see figure 1). Food insecurity is also more prevalent among women – an inequality that grew from 2019 to 2020 -—
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. In 2020, people were displaced by worsening conflicts and weather extremes spoiled crops and killed livestock. As the COVID-19 pandemic surged, governments acted, largely successfully, to keep food supply chains functioning -—
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but the economic impact disrupted the livelihoods of many and thereby put nutritious food beyond what many poor households could afford -—
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Figure 1. Global prevalence of undernourishment (SDG 2.1.1) and of food insecurity (SDG 2.1.2)
(Percentage)

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The Global Network against Food Crises finds that the number of people in an acute food crisis has increased several years in a row and did so again in 2021 -—
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. In 2021, increasing food prices are making food unaffordable for many people. This started before the war in Ukraine which created another major wave of displacement as well as considerable uncertainty over the global market for cereals and vegetable oils -—
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Globally, in pure calorie terms, there is enough food to feed the world. The average person on earth (considering all ages) needs a minimum of 1830 kcal per day to avoid undernourishment and about 2350 kcal per day for optimal health. The food available per person in 2019 amounted to 2950 kcal per day, up from 2830 kcal in 2010 -—
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Imported food is an important part of many economies’ food supply

Several factors affect food production over time and location, which means there are benefits of a diversified global market for food. Trade between regions and across 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 also 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 States Parties will take appropriate steps to ensure the realization of [the right to adequate food… taking] into account the problems of both food-importing and food-exporting countries, to ensure an equitable distribution of world food supplies in relation to need.International Covenant on Economic, Social and Cultural Rights, article 11

Trade is part of a global food system that depends on diverse local food systems. The complex task of these food systems is to feed the world and provide livelihoods to farmers and workers in food related industries and to do this in an environmentally sustainable manner -—
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. In the lead up to the Twelfth WTO Ministerial Conference in June 2022 -—
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, UNCTAD recommends that the international trade architecture be enhanced in such a way that international trade can do its part in increasing food security -—
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. These recommendations include counteracting export restrictions of essential food, supporting resource-poor agricultural producers, finding permanent solutions regarding public stockholding for food security, and scaling up financial and technical support to agricultural production in the LDCs and net food-importing developing economies. As the pressure on international food commodity markets was increasing in 2022, the UN Global Crisis Response Group on Food, Energy and Finance, coordinated by UNCTAD jointly with FAO and IEA, urged all countries to encourage proper functioning of international markets and to avoid ad-hoc policy responses, hoarding and panic buying of food and, furthermore, to exempt food purchases by WFP from any food export restrictions -—
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From 2016 to 2020, among economies with recorded data, as a median, 11 per cent of merchandise imports were basic food1. However, the importance of food to individual economies’ import basket varies considerably across countries. At one extreme, in Haiti food comprised 43 per cent of the total value of merchandise imports. Calculations based on UNCTADstat -—
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show that the share of basic food in merchandise imports exceeded 30 per cent also in Benin, Eritrea, Somalia, Yemen, American Samoa, Guinea-Bissau, and Wallis and Futuna Islands.

Seven in ten economies import more food than they export. After subtracting exports from imports, the median net imports of basic food were 4.3 per cent of total merchandise imports for the period 2016 – 2020. South America is home to several net food-exporting countries while many net-importing countries are found in the Middle East and Africa (see map 1). Another prominent group of net food importers are the SIDS. Half of the 20 economies with highest relative net food imports are SIDS. At the same time, many islands and other economies with access to oceans are net exporters of basic food – in the Falkland Islands (Malvinas) an estimated share as high as two thirds of all exports in 2020 were crustaceans, mollusks and aquatic invertebrates -—
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Map 1. Net import of food as a ratio to total imports, 2016-2020
(Percentage)

Source: UNCTAD calculations based on UNCTADstat -—
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Notes: Net food imports are calculated as imports minus exports of basic food excluding tea, coffee, cocoa and spices (SITC Revison 3 codes 0, 22 and 4 less 07) during the years 2016 – 2020. The percentage displayed is reached by dividing net food imports with total imports of all goods for the economy in the same period.

Cereals and preparations of cereals make up only 15 per cent of the exported food in value terms but they account for 44 per cent of the calories available to the world’s population. Meat and especially fish constitute far smaller parts of the dietary energy supply but play a similar role to cereals in international trade of food (see figure 2).

Figure 2. Share of calories supplied and US$ value of traded food, by food group, world total
(Percentage)

Source: UNCTAD calculations bases on -—
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and UNCTADstat -—
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Note: Food groups include preparations of the main commodity. Food products are grouped according to CPC Version 2.1 for supply in calories and according to SITC Revision 3 for export value. Live animals excluded from trade of basic food.

For many economies, imported cereals make up a substantial part of the food supply. In Yemen, two thirds of the calories supplied come from cereals and only a tenth of that is domestically supplied. This means that 59 per cent of the supplied calories are imported cereals (see figure 3). An additional consideration (not reflected in figure 3) is that Yemen is one of the many countries where total food supply does not exceed that needed for good health outcomes.

Figure 3. Top 20 economies by share of imported cereals of total dietary energy supply, 2017 - 2019
(Percentage of total dietary energy supply)

Source: UNCTAD calculations based on -—
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Note: Net imports of cereals, as a percentage of all supplied cereals (in weight), are calculated the same way as FAO’s indicator on cereal import dependency ratio, that is, (cereal imports - cereal exports) / (cereal production + cereal imports - cereal exports). This percentage is applied to the share of total dietary energy supply from cereals (in calories) to arrive at the percentage of net imports in the dietary energy supply. The remaining part of dietary energy supply from cereals thus come from domestic production.

Economies where much of the food supply comes from cereals, and little of these cereals are domestically produced, are particularly vulnerable to price increases in cereals. Over the first quarter of 2022, cereal prices rose by 20 per cent to an all-time high. Prices for vegetable oils grew even faster -—
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Rapidly increasing food prices threaten food security

Like other commodities, the price of food has increased over the last two decades. 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. There is a strong correlation between food prices and commodity prices generally, though food prices have tended to be less volatile than, for example, non-edible agricultural raw materials or metals (see figure 4). However, 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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. Since spring 2021, the year-on-year price increase of food has been above 10 per cent with a peak of 27 per cent in May 2021 (see figure 4). The prices continued to rise in the first quarter of 2022 due to the war in Ukraine. Not only did the war disturb grain exports from Ukraine, it also threatened to increase production cost of agricultural products via fuel and fertilizers putting even more pressure on food prices. From March 2020 to March 2022 the food subindex of UCPI increased by 38 per cent.

Figure 4. Growth rate for selected subindices of the UNCTAD commodity price index
(Percentage, monthly, year-on-year)

Source: UNCTADstat -—
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Note: The UNCTAD commodity price index displays the average development of prices, in United States dollars, of main primary commodities exported by developing economies. The food index excludes tropical beverages, vegetable oilseeds and oils. For more information, see -—
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Spikes in food prices can deny low-income families access to sufficient nutritious food. 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. Prices carry broad information about recent changes in supply and demand as well as signals about expectations and risks for future food markets. They can be observed easily and frequently -—
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. Episodes of rapid changes in food prices are sometimes induced by climate events. These episodes are expected to become more frequent with the rising number of extreme climate-related events -—
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The methodology for the SDG indicator of food price anomalies (SDG 2.c.1) relies on identifying food prices with growth rates that differ from the historical average -—
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. This method is applied both to individual food commodities and to the consumer food price index of an economy. In 2020, one in five economies experienced abnormally quick growth of consumer food prices (defined as Indicator of Food Price Anomalies with a value over 1, see figure 5). These economies were in all geographic regions and were of all sizes of population and GDP.

Figure 5. Food price anomalies, 2020 (SDG 2.c.1)
(Difference between compound growth rate and its historical mean, in standard deviations)

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and UNCTADstat -—
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Note: The Indicator of Food Price Anomalies is here applied to the price of a local basket of food items. Values in the range -0.5 to 0.5 are considered normal, value between 0.5 and 1 are considered moderately high and values above 1 are considered abnormally high -—
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Lebanon, with the value of 15.1, is outside the range of the figure. The x-axis has a logarithmic scale.

International trade in open and transparent markets may alleviate the effects of external shocks. UNCTAD has long called for increased transparency and tighter regulation of commodity markets to help avoid speculative bubbles -—
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. Applying these initiatives in food markets can contribute to food security.

Agricultural export subsidies are vanishing, but production is still supported

Agricultural 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 to modify 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 lower. As such, subsidies may have many spillover effects for the global economy where they can exacerbate volatility and food price spikes. They allow exporters to gain market share without the efficiencies that should accompany such growth. The harmful effects on international trade were already noted in GATT 1947 -—
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The WTO Agreement on Agriculture, which came into force in 1995 -—
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, placed limits on export subsidies that distort agricultural trade 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 subsidies 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$ three and four trillion in the early years of the 2000s with the majority provided by the EU. Subsidies by the EU have since ceased, and the total has decreased substantially. The 2015 Nairobi package has further strengthened WTO members’ commitment to abolish trade-distorting subsidies in agricultural markets. In 2019, only five economies notified WTO about agricultural export subsidies to a total value of US$58 million (see figure 6).

Figure 6. Notifications to WTO of agricultural export subsidies (SDG 2.b.1)
(Millions of US$)

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Notes: Only export subsidies budgetary outlays notified to WTO by members who are required to do so are included -—
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However, export subsidies are dwarfed by the total support that governments provide to agricultural producers that amount to a market price support, either though licenses, tariffs or other measures that raise domestic market prices or though budgetary expenditures benefitting the agricultural sector -—
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. In OECD countries, these forms of support summed to about US$238 billion in 2020, which accounts for about 18 per cent of gross farm receipts. This support too has decreased over time. In 2000, this figure was 30 per cent -—
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. Agricultural markets are further supported by budgetary transfers to consumers and by general service supports that are not paid directly to producers but has the agricultural sector as its main beneficiary. A report by the Food and Land Use Coalition -—
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estimates that, globally, the agricultural sector is supported to the tune of US$700 billion per year. These forms of support differ in the degree they give recipients a competitive advantage that distorts global food markets. Support has been moving in the direction of less distortion by decoupling support that incentivize production towards good use of existing land. It is also recognized that changing support for food exports may change market conditions for net-food importing developing countries and that this needs to be compensated by ensuring that food aid is not hindered and by promoting agricultural productivity in these countries though technical and financial assistance (-—
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; see also Official support for sustainable development).

The report of the -—
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found that much of the current use of agricultural subsidies leads to inefficient land use and that there are huge opportunities in reorienting subsidies away from high carbon-emitting production and incentives for deforestation and redirecting them towards more sustainable practices. The positive effects would be manifold, including improving global health and combatting climate change. Especially among OECD economies there is a push towards payments to producers that are conditional on production practices that preserve public goods, such as, biodiversity. Even as export subsidies are being phased out, policies for agricultural trade and support remain key factors in building sustainable food systems -—
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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 HS 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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