This chapter addresses the interface between regionalism and food security. This is a relatively neglected topic with a very limited literature. There are two main aspects to this interface: (a) the consequences of regional integration (and, especially, regional trade integration) for food security, and (b) the opportunities which exist to address food security issues within a regional framework. This chapter highlights the potential impacts of regional trade integration on food security and reviews recent thinking on the contribution which regionalism can make to food security.
Dimensions of food security
The Rome Declaration agreed at the World Food Summit in 1996 states that food security is achieved when all people, at all times, have physical and economic access to sufficient safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life. Food security has three levels of intervention and three dimensions.
At regional and national levels, the key objective is to ensure the availability of food of acceptable quality. Food availability may be assured through a combination of domestic production and regional and international trade. Successful overall development is the best way of promoting overall food availability. National level food security is not synonymous with food self-sufficiency and the promotion of self-sufficiency may run counter to improving food security.
At the household level, the key objective is to ensure sufficient access to food by all households. Access is a function of the demand and purchasing power of both urban and rural consumers. Lack of access to food is basically an outcome of poverty. With 70 per cent of the world’s extremely poor and food insecure people living in rural areas, the role of agriculture is crucial to the eradication of poverty. The rural poor depend on agriculture both for their incomes and food entitlements. Chronic food insecurity can be tackled most effectively through policies that promote agricultural productivity, rural incomes and food production (FAO, 2001). Evidence assembled by Norton (FAO, forthcoming) supports the view expressed by Mellor (2000) that there has been a tendency to generalize that economic growth reduces poverty, when in fact it is the direct and indirect effects of agricultural growth that accounts for virtually all of the poverty decline.
At the individual level, the key objective is to ensure food use and nutritional adequacy. Use of food relates to issues of consumption and nutrition and is affected by nutritional practices, the intra-household distribution of food, mother-child feeding practices and food preparation.
Effects on food security...
Food security will be affected by international trade in general and agricultural trade in particular. To the extent (a) that increased intra-regional trade fosters economic growth and increases employment prospects and the income-earning capacities of the poor, it will enhance access to food. The lesson from Chapter 2 is that whether regional integration promotes overall economic growth will depend on the design of the agreement, and whether it succeeds in promoting more trade creation rather than trade diversion. Increased intra-regional agricultural trade could also promote food security in two further ways: (b) by augmenting domestic food supplies to meet consumption needs and (c) by reducing overall food supply variability.
Vollrath (1998) examined the impact of six regional trade areas on agricultural trade. He found no evidence that either APEC or AFTA either created or diverted agricultural trade. ANZCER, CUSTA and MERCOSUR were found to have had positive influences on economic welfare and to have helped open members to the world agricultural economy. Each of these regional trade agreements created more agricultural trade than it diverted. In contrast, for the sixth RTA he examined, the EU, agricultural trade diversion exceeded trade creation.
To evaluate the food security effects of RTAs, however, a more nuanced analysis is required. Lower trade barriers generate the potential for trade creation. However, potential beneficiaries of regional integration among low-income farm households may be unable to take advantage of increased market access opportunities in the presence of supply-side constraints. Accompanying measures may be needed to assist them to increase both the volume and quality of their output to take advantage of the market opportunities created. This implies the need for targeted interventions focused on training of and investment by low-income farm households in the context of regional integration strategies. This will be particularly important in Africa where increasing numbers of small-scale farmers have withdrawn from market production in the wake of domestic liberalization.
There will also be those who either fall behind or lose out in the regional integration process. Thus, while trade integration may contribute positively to higher production and output growth, if those who lose out are concentrated disproportionately among food-insecure households, then the overall impact on food insecurity in the short run may be negative. In countries with dualistic agricultural structures, it may be the larger commercial farms already well-integrated into food markets which benefit, while semi-subsistence smallholders are simply too constrained to take advantage of the new market opportunities and may even lose out from greater import competition on the domestic market.
Skully (1998) has remarked, in the context of developed countries, that analysis of the distributional effects of regional integration for farm households is a new research topic with, at present, few definitive answers. He argues that how a farm household will fare following integration depends on both its commodity exposure (what the farm can produce profitably) and its asset exposure (its tenure situation and the sector specificity and diversification of its assets). The risks of trade integration point to the need for country-specific and region-specific evaluations of market integration on the overall status of food insecure households. Where supply constraints are identified, regional integration strategies should include investment and training interventions to address these constraints, including technology transfer and rural extension; new production alternatives, labor training on new farming practices and for off-farm activities; and possible ways to integrate smallholders with more commercial farm enterprises. Where negative impacts are identified, then a regional integration strategy which is food-security aware should be accompanied by flanking measures to address these negative impacts.
Because regionalism, especially among developing countries, was seen as an instrument of industrialization in the past, there is relatively little literature on its potential to contribute to food security. Thus recent thinking in both FAO and the EU Commission on how regional initiatives can promote food security is of particular interest.
Regional Strategies
FAO has developed its ideas in the context of the Regional Strategies for Agricultural Development and Food Security and the follow-up Regional Programs for Food Security (RPFS) which twelve regional economic groups have prepared with FAO assistance.[14] The Regional Strategies were based on the key policy recommendations emerging from the World Food Summit follow-up Strategy Papers on National Agricultural Development prepared by the individual members of each grouping. They identify areas requiring investment and technical support for agricultural development and food security, including the national Special Program for Food Security in those countries where it is operative. The Regional Programs (RPFS) are designed to implement the key elements in the Regional Strategies and usually consist of three components:
trade facilitation
harmonization of national agricultural policies
support to the national Special Programs for Food Security.
The trade facilitation component generally includes proposals to support modernizing food safety control systems and standards, standardizing phytosanitary and zoosanitary standards, promotion of intra-regional trade through identification of trade barriers, preparation of development programs for major export commodities, review of the impact of implementing the relevant WTO Marrakech Agreements and assistance in participating in the current WTO negotiations. Under the other two headings, support is envisaged to identify investment programs and to prepare feasibility studies of bankable investment proposals. In addition, agricultural policy assistance is envisaged both to strengthen each regional grouping (and especially its capacity to formulate a common agricultural policy for the region and to monitor and contribute to the investment strategy envisaged under the RPFS) as well as to support individual ministries, public institutions and those responsible in civil society for agricultural development.
EU food security paper
The EU Commission has also addressed the role of regionalism in food security in its concept paper on food security (EU Commission, 2000):
“Many of the critical elements of poverty reduction strategies and the promotion of food security have regional dimensions, including, among others:
macro-economic reforms and the promotion of sustainable growth;
reducing barriers to trade, as a way of promoting integration of countries into the wider economy;
assuring the availability of secure food supplies, and managing shocks through increased regional trade;
strengthening good governance through the promotion of political integration at the regional level;
improved management of shared regional natural resources;
capturing economies of scale by creating regional capacity for research and human resource development.” (EU Commission, 2000, p. 14-15).
Thus, the key links between regionalism and food security emphasized in the EU paper are (a) the way membership of the regional grouping helps to ‘lock in’ and sustain macro-economic policy reforms as well as promoting political cooperation in the region, (b) trade and market integration, and (c) regional cooperation through joint institutions in areas where there are clear spillovers or economies of scale.
Agriculture will be a part of future schemes...
For intra-regional agricultural trade to impact on food security, barriers to such trade must first be reduced or eliminated. Trade facilitation measures which can be taken on an inter-governmental basis (improved information on market opportunities, reduced frontier formalities, recognition of the mutual equivalence of SPS controls, etc.) are important in this context. Improved physical infrastructure for transport, communications and payments between members of a regional grouping is paramount, particularly in Africa where inadequate infrastructure remains a huge constraint to increasing intra-regional trade. Finally, trade policy barriers arising from differences in the stance of domestic agricultural policies will need to be addressed. It is this latter issue which gives rise to the growth of interest in common agricultural market schemes in the context of the revitalisation of regional economic groupings. As noted, agriculture is being included in an increasing number of RTAs.
The objective is not to pursue intra-regional agricultural trade for its own sake but to remove artificial constraints which prevent potentially advantageous trade from taking place. Trade should be a consequence of appropriate trade and development policies rather than an objective in its own right.
...and will favour formation of customs unions...
A prerequisite for a common agricultural market is that a similar policy regime applies in each national market. Note that this is a de facto and not a de jure requirement. An FTA allows each partner to retain its policy autonomy with respect to external protection against third countries while permitting unrestricted access to imports from partner countries. For example, most developing countries have established ceiling tariff bindings in the WTO but use applied tariffs which are considerably lower (FAO, 2002). This margin gives scope to alter applied tariffs within WTO rules in order to stabilize domestic prices. In the case of countries in a regional grouping, however, such autonomy is more nominal than real. Any attempt by one country to keep its domestic prices below those of its neighbors will lead to an outflow of products and put upward pressure on its prices; similarly, any attempt to keep its domestic prices above those of its neighbors will attract imports and put downward pressure on its prices. The high ratio of unrecorded trade in agriculture already taking place in part reflects this arbitrage process at work where there are significant differences in policy regimes on either side of a border.
Policy harmonization can be achieved either by transferring agricultural policy to the supranational level within the region (as in the EU) or by coordinating national policies (MERCOSUR, NAFTA). The simplest scenario is where all partners adopt a laissez-faire approach to agricultural markets and avoid policy interventions of any kind. By definition, this implies the necessary degree of policy harmonization for a common agricultural market to function. Although developing countries have undertaken considerable market liberalization in recent years, including trade policy reforms and the elimination of monopoly marketing boards, significant policy interventions still occur. Further, developing countries in the WTO agricultural negotiations have made clear their preference to maintain agricultural market interventions for food security purposes.[15] Some mechanism must be found to coordinate these interventions if regional trade arrangements are to operate.
Thus there will be strong incentives to move to a customs union if agriculture is included in a regional integration arrangement.[16] While this is a huge area for analysis in its own right, five areas are highlighted for further discussion.
...the continued existence of border controls...
Three stages of market integration can be distinguished. The initial stage is where barriers to intra-regional trade arising from payments difficulties (currency inconvertibility, absence of clearing facilities or long delays in receiving payments), illegal roadblocks, etc. are removed. This stage must still be reached among some countries especially in Africa. The second stage is that which characterized the EU between 1968 and 1992 where formal trade barriers are removed on intra-regional trade but borders and frontier formalities still exist for the purposes of collection of statistics, protecting against animal and plant diseases, regulatory enforcement of food safety and technical standards, controlling tax collection, etc. The third and most ambitious stage is to move to a single market where frontiers no longer exist. Even in a customs union, frontier formalities act as non-tariff trade barriers. The trade-chilling effect of borders can be reduced by harmonizing regulatory policies across member countries and by simplifying trade procedures and documentation (trade facilitation). The priorities in removing barriers to intra-regional trade should take into account the stage of integration already reached in each regional group.
...which will require decisions on the level of the common external tariff
The most important decision relates to the level of external protection to be provided to producers within the union (the level of the common external tariff, or CET). The higher the level of protection, the greater the likelihood that trade diversion will occur with its associated intra-regional transfers. There will be strong political economy pressures within a union to raise the level of the CET. First, producer associations will press for the maximum level of protection.[17] Second, high-cost agricultural members of the union will seek high levels of protection, even though they will end up paying the trade diversion costs.[18] High levels of agricultural protection are not compatible with the ideas behind the ‘new regionalism’ reviewed in Chapter 2 and may also conflict with the promotion of food security. It is sometimes argued that high external protection -> greater domestic food production -> higher farm incomes -> lower rural poverty -> greater food security. However, the assumptions behind this chain of reasoning need to be tested against the situation on the ground. Those who benefit most from higher prices may not be the most food-insecure, and the negative impact of higher food prices for rural food-deficit farm households and the urban poor, as well as on wages and employment in the non-farm sector more generally, must be taken into account. As noted earlier, there will be a need for country-specific and region-specific evaluations of market integration on the overall status of food-insecure households. Studies which spell out the implications of alternative CET levels for food security should have a high priority.
Other issues include domestic subsidies...
Compared to developed countries, domestic subsidies to farmers play a much less important role in the agricultural policies of developing countries (FAO, 2002). Few developing countries have the sort of decoupled transfer payments to farmers which are permitted under WTO Green Box rules. However, input subsidies (fertilizers, water, credit) may be important in some countries. Administrative price support arrangements may also be important in some middle-income developing countries. Direct subsidies may become more important in future to the extent that WTO disciplines on price support policies become binding.
Differences in domestic subsidies to farmers can be a significant bone of contention. Producers in countries importing from a country where subsidies are provided will complain loudly about ‘unfair competition’ and may ultimately resist and blockade such imports. For this reason, rules about permitted levels of subsidies are important in a common agricultural market. We assume here that subsidies are provided by national governments to domestic farmers and not by the supranational region (as is the case for many subsidies paid to farmers in the EU).
If subsidies are genuinely decoupled, such that producers’ incentives are unaffected, then no competition issue arises. However, it is hard to envisage a fully decoupled subsidy even in developed countries. Subsidies paid on the land area farmed are the closest approximation, but still require farmers to produce on that land to retain eligibility. But the types of subsidies commonly paid in developing countries, particularly input subsidies, clearly do stimulate production and thus have competitive effects on other farmers in the regional grouping. For this reason, common rules on the maximum level of subsidies that can be paid will need to be negotiated. For similar reasons there will also be pressure to harmonize tax structures. For example, where countries have implemented a VAT system of consumption taxes, differences in the way indirect taxes on inputs are refunded can create hidden sources of competitive advantage.
Some countries may have consumer food subsidies in place for particular consumer groups as a food security measure. Consumer subsidies, although they equally distort trade, are unlikely to be challenged in a regional arrangement because of the mercantilist attitude of partners who will welcome the increased market opportunities. Hence rules in this area are unlikely to be needed.
The presumption so far is that where the regional grouping wishes to provide protection to regional food production, it will do this through border protection. The grouping may also wish to guarantee minimum prices to farmers as is the case in the EU. Common support price arrangements of this kind can prove very expensive to operate and would undoubtedly strain the weak financial resources of many developing country groupings. They would also exacerbate the distributional conflicts between net exporting and net importing members of the group.
...and the distribution of tariff revenue
A customs union generates revenue. This creates the need for some mechanism to either use this revenue for regional projects or, more commonly in the developing country context where trade taxes make up a significant share of government revenue, to recycle it to the member states. Particularly where levies are collected by coastal states on goods intended for use in landlocked partners, it will appear that the coastal states are ‘paying’ a higher proportion of the costs of the regional group.[19] This may give rise to unjustified complaints. It may also be desirable to build in a deliberate preference in the distribution of revenues in favor of less developed members of the group. Also, the high reliance of some developing countries on trade taxes for government revenue may lead to an additional reluctance to lower the CET apart from the protectionist motives discussed above. External donors can play a useful role in minimizing distributional conflicts and in encouraging moves to a more open trade policy by offsetting the impact of revenue losses.
Food Security Financial Instrument
Regional integration will produce losers as well as winners. An important role for a regional integration program should be to address the supply-side constraints and the negative impacts of trade integration on food-insecure households. This implies targeted investments both to help food-insecure rural households to take advantage of the opportunities opened up by greater market access, and to help those adversely affected by increased import competition to improve their competitiveness or to diversify.
For this purpose, a specific Food Security Financial Instrument should be considered as part of an RTA arrangement. Such an Instrument could be used to finance national initiatives to increase or diversify agricultural production in the context of regional trade integration. It could also finance schemes to address adverse consequences for urban food security which might arise, for example, from higher staple food prices resulting from integration. For example, Brazil’s Zero Hungry Project proposes a methodology which could be used as it recognizes that low incomes are the main cause of chronic hunger in Brazil. In order for the Instrument to effectively address the adverse food security impacts of trade integration, the population groups which are adversely affected by this process would need to be identified and appropriate projects to assist them would need to be defined.
Functions of the regional authority
Apart from facilitating trade integration, a regional grouping can play one of two roles: it can have a catalytic function, identifying opportunities for cross-border collaboration and encouraging or preparing the analytical studies necessary to support investment proposals; or it can have a directly executive function, where activities on a regional basis become the direct responsibility of the regional grouping. In the developing country context, where the institutional and budgetary basis for regional groupings is weak, regional secretariats are most likely to play a catalytic role, but may take an executive role in relatively low-cost activities, e.g. publishing regional statistics, regional market information, running policy analysis networks, supporting training and networking functions. The precise balance between these two roles will depend on the degree of integration sought by the region and on the functional area of cooperation.
Strengthen inter-governmental co-operation
Functional cooperation is designed to take advantage of scale economies in operating institutions at a regional level and in managing common resources. There already exists considerable technical co-operation at the regional level between developing countries (water basin authorities, fisheries, disease control, meteorological bodies etc.). Many of these organizations are underfinanced and insufficiently staffed and organized to fulfill their mandates. Regional integration programs should identify relevant intergovernmental organizations already operating in the region, and evaluate the constraints and obstacles to their efficient operation.
Examples of policy co-operation...
Even in the absence of a full common market for agricultural products, regional cooperation on policy harmonization can promote agricultural trade. Examples include:
Continued reduction of trade barriers on intra-regional trade. The African Cross-Border Initiative showed that substantial trade liberalization can take place on a coordinated basis without the need for a heavy institutional infrastructure. Trade barriers on certain food products might be addressed in this way, although the continued significant policy intervention in staple food markets in many countries means that progress in this area will usually require deeper policy integration than simple cooperation.
Development of a coordinated international trade policy framework. Integration will be facilitated if members of a region co-ordinate their policy stances in WTO agricultural negotiations and, for ACP States, in the negotiations of EPAs with the EU. Technical assistance to support these negotiations will be required.
Trade facilitation and development. This topic includes the establishment of common phytosanitary regulations and common standards within the region as well as the harmonization of tariff nomenclature, customs valuations and customs procedures.
Coordination of fiscal incentives to encourage agro-industrial processing foreign investment. This is desirable to avoid the danger of beggar-my-neighbor policies to gain first mover advantage - if only one processing plant can be economically established in a region, there will be a strong temptation for countries to bid against each other to attract that plant.
Establishing a strong underlying framework for the protection of intellectual property. WTO member countries are committed under the TRIPS Agreement to establish intellectual property protection for plant varieties and it would make sense to co-operate on a regional basis to implement the relevant legislation and institutions.
Regional food security reserves. Mechanisms to insure against the dangers which volatility of food prices or supplies poses are an important part of a food security strategy. The option to import is usually a more cost effective approach than holding grain reserves. However, for land-locked countries with high transport costs, national stock-holding may be a competitive alternative. In these circumstances, the option of managing grain reserves on a regional basis may be a cost-effective solution for some countries.
...and networking
Even in those cases where specific food security initiatives are best undertaken nationally and where there are no immediate spillovers to other countries, networking and benchmarking may be relevant regional activities. The objective is to improve regional learning by enabling those involved in similar activities in neighboring countries to benefit from each other’s experiences, to exert peer pressure to raise standards and to encourage the spread and adoption of best practice solutions. This type of ‘soft’ policy coordination is increasingly used within the EU for policy domains which are predominantly undertaken at the national level such as employment and anti-poverty strategies. Relevant food security examples might include initiatives on water management, land tenure reform, nutrition programs, etc.
Regional trade integration can be a positive force for food security if it contributes to higher overall economic growth in participating countries.
However, there is nothing automatic about this process. This chapter argues for the concept of food security-proofing of RTA proposals to evaluate their specific and concrete effects on food-insecure households. This would mean identifying marginal population groups whose food security status may be adversely affected by integration, as well as identifying groups whose similar status may be improved by integration, but who will require assistance in order to realise the opportunities created. The concept of a Food Security Instrument which would fund interventions to improve the outcomes of regional integration for these vulnerable population groups was advanced. A prerequisite for such interventions is careful analytical studies to identify the population groups most at risk.
The opportunity should be used of the formation and strengthening of RTAs to facilitate regional cooperation initiatives in the provision of regional public goods, appropriate policy harmonization and support for networking and benchmarking and other forms of ‘soft’ coordination. While in most such cases trade integration is not a necessary condition for these kinds of collaboration, it may be efficient to use the establishment of regional institutions and a regional secretariat for the pursuit of trade integration to kickstart regional cooperation initiatives. Examples of potential areas of collaboration were given earlier.
While regional integration can be a useful instrument to enhance food security, subject to the various caveats mentioned in the paper, the way it would do this is through improving the production, processing and marketing environment. The fundamental issue is to improve the ability of countries to respond to the economic stimuli resulting from the integration process. The resolution of the constraints which limit domestic supply response (technology, inputs, credit, infrastructure, etc.) must remain primarily a national responsibility. In this sense, regional integration is not an essential component of a national food security strategy although it can be of help.
| [14] The groupings include
AMU, CEMAC, CEN-SAD, COMESA, ECOWAS, ECCAS, IGAD, SADC, WAEMU, CARIFORUM,
SPF and, in Europe, BSEC. [15] See the negotiating proposals of the WTO African group as well as the proposals by a group of developing countries for a development box (WTO G/AG/NG/W/13). [16] Josling (1997) noted that similar problems would also apply if one country tried to maintain an import quota on third country imports and that, to be effective, import quotas, like tariffs, would have to be regionalized. In principle, in the WTO Agriculture Agreement countries agreed to dismantle all import quotas in favour of tariff-only border restrictions. However, many developing country WTO Members retain quantitative import restrictions on balance-of-payments grounds while other countries in a regional grouping may not be WTO Members, so this issue could still be relevant. [17] See the Conclusions de l'atelier régional sur la politique agricole de l'UEMOA, Ouadagoudou, 2.3 et 4 octobre 2001 organised by Solagral in cooperation with Réseau des Organisations paysannes et des producteurs agricoles de l'Afrique de l'Ouest (ROPPA).
[18] At the time of the
establishment of the EU’s Common Agricultural Policy, Germany as
a relatively inefficient food producer sought higher levels of protection,
which resulted in it being the major net contributor to intra-EU transfers
in subsequent decades. In this instance, Germany also had an above-average
per capita income within the EU so the transfers could be rationalized
because of their positive redistributional effects, but this need not
necessarily be the case in other customs unions. |
