Agricultural Trade Fact Sheet

AGRICULTURAL TRADE AND FOOD SECURITY Trade contributes to food security in a number of ways: it augments domestic supplies to meet consumption needs; it reduces supply variability, though not necessarily price instability; it fosters economic growth; it makes efficient use of world resources; and it permits global production to take place in those regions most suited to it. Trade is of continuing importance for both developed and developing countries. Figure 1: Food and agricultural trade of the developing world WORLD FOOD AND AGRICULTURAL TRADE CONTINUE TO REMAIN ROBUST The value of world agricultural trade, including fishery and forestry products, has more than doubled since 1980 to reach close to US$650 billion in 1995-97. The share of farm products in merchandise trade has fallen over time and currently stands at about 12 percent at the world level. However, this average conceals the much greater dependence on agricultural trade of many individual developing countries, both as exporters and as importers. In around 25 percent of the countries the share of agricultural exports exceeds two-thirds of total exports, while in a further 20 percent the share exceeds one-third. Low-income countries remain most heavily dependent on agricultural trade, often still relying on one or a few agricultural exports for the bulk of their foreign exchange earnings. Trade in food products has also exhibited similar trends since the early 1970s. The value of world food trade in 1995-97, about US$315 billion, was twice the level of 1980-82. Developing countries accounted for some 26 percent of total food trade in 1995-97, but about the same share as in 1980. In this period, total food import bill of the developing countries increased by 70 percent to reach US$100 billion now (Figure 1). These trends highlight not only the growing importance of trade in meeting food consumption needs, especially for the developing countries, but also their growing food import bill. FOOD SECURITY SITUATION IN THE DEVELOPING COUNTRIES REMAINS UNACCEPTABLE The number of undernourished people in the developing countries remains unacceptably high. In 1995/97, some 820 million people were estimated to be undernourished, the bulk of them - 790 million - in the developing countries. Some progress was evident in most recent years - the number in the developing world fell by 40 million between 1990/1992 and 1995/1997. This decline, however, represents the extraordinary achievement of just 37 countries, which realized reductions totalling 100 million. Across the rest of the developing world, the number of people who are chronically undernourished actually increased by almost 60 million. For the group of least-developed countries, the percentage undernourished stands at 38 percent and has not changed for the past 16 years (Figure 2). Figure 2: Percentage of population undernourished The World Food Summit's goal of reducing the number of hungry people in the world by half by the year 2015 will not be reached. The recent decline amounted to 8 million persons a year, which is not enough. To achieve the Summit goal, the rate of progress needs to be stepped up by 150 per cent to 20 million fewer hungry people each year. INCREASED TRADE IS NECESSARY BUT NOT SUFFICIENT TO ALLEVIATE FOOD INSECURITY While increased food imports raises food consumption and contributes to reducing undernourishment, trade is unlikely to contribute substantially to food insecurity problem in a majority of the developing countries. Most of the world's food insecure are rural-based and rely on farm and non-farm employment and income, that in turn depend in one way or other on agriculture. And it is the agricultural sector that generates the strongest economic linkages in most of these countries. Historically very few countries have experienced rapid economic growth and poverty reduction without agricultural growth, either preceding or accompanying it. Most projections show that the developing countries will continue to be large importers of basic foods. This begs some important questions. Can the rest of the world produce the required export surpluses? And how will the new policy environment governing global agricultural production and trade affect those prospects? At the same time, would the export earnings of the developing countries keep pace with their increasing food import dependency? Past experience has shown that unless food is made available free of cost, the poor and the food insecure in the developing countries will not have access to adequate food. For them, economic access is assured only if they produce the food themselves or have economic means to purchase, which in the current state of their economies must come from increased food and agricultural production. INTERNATIONAL REGULATORY FRAMEWORK GOVERNING AGRICULTURAL POLICIES AND TRADE SHOULD BE ENABLING TO REDUCE FOOD INSECURITY It is clear from the above that agricultural development must be in the forefront of any national or international agenda to eradicate food insecurity. For the same reason, it is essential that international regulatory framework governing agricultural policies and trade takes this fact into account. So, then, what issues are at stake from the standpoint of agricultural development of the developing country in the context of the upcoming round of multilateral trade negotiations on agriculture? There are several, but the following four points should cover most of these. these countries would need enough flexibility within the rules to enhance the capacity to fully develop their agriculture. This would require considerations in a number of areas, including flexibility in domestic support measures and setting appropriate levels of border protection. it is important to ensure that they raise their share of agricultural exports, which has stagnated at around 30 percent of world agricultural trade for a long time. Further improvements in market access terms in major developed country markets can make immense contribution to this process. sharply reducing the high trade-distorting support to agriculture in many industrialized countries would also contribute to create a conducive environment for agricultural development in these countries. many of these countries do need urgent assistance to strengthen supply-side capability. Various Uruguay Round agreements contain provisions for financial and technical assistance, which require effective implementation.