By Staff Writer | for Cabanga Magazine
Since 1995, international trade in food and agriculture more than doubled in real terms to amount to USD 1.5 trillion in 2018. Emerging economies and developing countries are increasingly participating in global agricultural and food markets; their exports have grown to more than one-third of the world total.
This growth in trade is the result of several drivers. Lower transport costs have made it cheaper to trade. Trade policies and the decline in import tariffs – resulting from the World Trade Organization (WTO) Agreement on Agriculture that entered into force in January 1995 and many bilateral and regional trade agreements – have also been key drivers in promoting trade in food and agriculture.
These drivers, together with increases in income in both developed and developing countries, have fuelled trade expansion in food and agriculture. Income growth is also associated with demographic trends, such as urbanization, which all bring about new lifestyles and changes in diets, thereby affecting trade and markets.
As countries develop, people consume less staple foods and more meat, dairy products, and fruit and vegetables. These changes in diets are reflected on international trade patterns. Urbanization is occurring at a more rapid pace in the developing world than it did, for example, in Europe and has affected domestic food markets. Consumers’ preferences for convenience, food quality and safety are strengthening the vertical coordination of food value chains. In countries in Asia and Latin America and the Caribbean, sales of leading supermarket chains increased up to tenfold between the beginning of the century and 2018. In sub-Saharan Africa, urban consumers are also more likely to shop in supermarkets, and they spend a higher share of their income eating out.
At the same time, advances in digital technology have improved communication between people and are having a profound impact on economies and societies. Better communication brings about cultural proximity which, in turn, affects consumers’ preferences for food. Also, as farmers and firms find it easier to communicate, they can better coordinate their operations across borders and become part of global value chains. This report estimates that about one-third of trade in food and agriculture takes place within global value chains and crosses borders at least twice, as primary commodities are initially exported to be processed into food products, which, in turn, are re-exported.
The evolution of international trade and agri-food global value chains were interrupted by the financial crisis in 2008. Since then, the slowdown of the global economy, and especially in emerging economies, has affected trade and global value chains. In the first part of 2020, markets, both domestic and global, have been once more facing significant challenges due to the outbreak of COVID-19 and to the restrictions on people’s movement and international travel that were imposed to contain its spread. The pandemic and its impact on the global economy are expected to affect trade considerably. The WTO suggested that world merchandise trade would plummet by 13–32 percent due to the COVID-19 pandemic disrupting economic activities.
Governments and the private sector are attaching high priorit y to keeping food value chains alive and functioning amid movement restrictions. Efforts are being made to link food production areas with urban centres through special channels (following safety measures, such as testing, physical distancing and other hygienic practices) to accelerate the delivery of perishable and nutritious foods to affected populations.
At the global level, policy-makers in many major food exporting countries committed not to impose restrictive trade measures, such as export bans, to ensure that trade could continue to move food and agricultural products from surplus to deficit regions, thus promoting food security globally.
Full report is available from the FAO and WTO websites.
Source: FAO, WTO
