With increasing uncertainty over the world food security leading to fragmenting global agrifood markets and magnifying hunger threats, experts call for a robust and well-integrated global system to withstand unprecedented challenges, as evidenced during the COVID-19 pandemic in early 2020.
In its flagship report – The State of Agricultural Commodity Markets 2022 (SOCO 2022), the FAO stresses that that Global cooperation in agricultural trade policies can address global challenges, such as economic crises, pandemics, conflicts and climate change, and it can contribute towards food security and healthy diets for all.
“Efficient trade can promote world food security and better nutrition. Trade can also help global agrifood systems use scarce natural resources, such as land and water, more effectively and sustainably and to diffuse modern technologies worldwide,” said FAO Director General QU Dongyu.
The report pointed out that conflict in Ukraine, one of the breadbaskets of the world, threatens global food security in multiple ways, including through the disruption of global food and agricultural markets. The war in Ukraine has not only resulted in a severe humanitarian crisis and a looming increase in global food insecurity, but also in the potential break-up of global cooperation in trade.
The report states that increasing globalization of food and agricultural markets raised concerns about the potential impacts of trade on the environment and on societies. “International trade in food and agriculture is viewed as contributing towards the depletion of natural resources, driving deforestation and biodiversity loss, accelerating changes in lifestyles and diets, and widening inequality,” it said.
Noting that agricultural productivity gap is enormous, the FAO report said that relative differences in agricultural productivity across countries could determine the influence of comparative advantage in food and agricultural markets and can shape trade patterns. “Trade costs, which are also shaped by geography, are significant and can partly insulate low-income countries, limiting opportunities for growth and development,” it said.
GLOBALIZATION AND REGIONALIZATION
Food and agricultural trade expanded rapidly in the new millennium, catalysed by trade liberalisation at multilateral and regional levels. Further, the report stated that the global food and agricultural market became less concentrated and more decentralized. In 1995, a few large players dominated the global market, Over time, the number of large traders increased, while their dominance weakened. Moreover, the FAO said that Trade intensity is higher within rather than across regions, and the regionalization of food and agricultural trade is relatively more pronounced.
The FAO detailed that global food and agricultural market has become more resilient, but many countries remain vulnerable to trade shocks and should diversify their import sources to safeguard their food security
OTHER KEY TAKES
- Increasing productivity, lowering tariff barriers and reducing trade costs can increase the gains from trade but complementary policies are necessary to reduce inequalities that may arise
- Globally, food and agricultural trade can enhance the efficiency of land and water use but can also result in negative environmental impacts
- Most of trade’s environmental externalities arise due to local conditions, and trade policies will have to be complemented by specific environmental measures to address them
- Multilateral trade negotiations are in a deadlock, while extensive regional trade agreements, which increasingly include food and agriculture, are on the rise