Globalization of Food and Agriculture and the Poor: Driving Forces, Consequences and Policy...
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Globalization of Food and Agriculture
and the Poor: Driving forces,
Consequences and Policy Implications
Joachim von Braun
International Food Policy Research Institute
A Millennium Lecture at the
Hindu Media Resource Center of
MS Swaminathan Research Foundation,
Chennai, India, August 22, 2007
Overview
1. Issues and conceptual framework
2. Drivers of agriculture and food
related globalization and impacts
on the poor
3. Policy and research implications
Context of global change around
food and agriculture
1. Global economy‟s fast growth
2. Energy price and climate change
3. Health risks and agriculture
4. breakthroughs in science and
technology
5. Urban/rural change & migration
6. Governance and decentralization
a mix of opportunities and risks for the
poor in “globalization”
The problem with the globalization debates
Divisiveness between the two globalization views:
1] economic-lens approach, narrowly focused
2] unfocused systems approach, neglecting opportunities
and both have particularly distorted and dogmatic perspectives around
agriculture – food – poverty linkages
What is “globalization” of
agriculture and food?
A technical definition: Global integration—across national
borders—of production, processing, marketing, retailing, and consumption
of agriculture and food items
And what are the links to poverty?
Need for a conceptual framework that
connects globalization drivers to well
being at different levels…
• Global
• National and state
• Community and household
…to facilitate action
Conceptual framework: drivers and examples
of actions at different levels
Source: von Braun, 2007
MARKETS INVESTMENT &
CAPITAL FLOWS
INFORMATION &
INNOVATION
SOCIAL POLICY
LEV
EL
I
GLO
BA
LIZA
TIO
N
Exo
geno
us fa
ctor
s
Increased access to outputs, inputs, labor
Expansion of FDI
Improved ICTs
Innovation & IPR
Aid; human right to
food
LEV
EL
II
DO
ME
STI
C
PO
LIC
Y
Market opening
Competition policy
Political &
institutional changes
Technology policy
Public R&D investments
Pro-poor social
actions
LEV
EL
III
HO
US
EH
OLD
S
RIGHTS
PRICES
EMPLOYMENT HOUSEHOLD
ENDOWMENTS
PRODUCTION CONSUMPTION
The slow changes in poverty
• Slow reduction in income poverty
• Increased vulnerabilities
• Stagnation in nutrition improvements
• Growing in-equities
despite of of massive expansions of
opportunities under globalization
Mixed Evidence: Poverty headcount ratio at
$1 and $2 a day (PPP) as % of total population
Share of people living on less than $1 a day
(% of population)
0
10
20
30
40
50
60
70
1981 1984 1987 1990 1993 1996 1999 2002
East Asia & Pacif ic Europe & Central Asia
Latin America & Caribbean Middle East & North Africa
South Asia Sub-Saharan Africa
Share of people living on less than $2 a day
(% of population)
0
10
20
30
40
50
60
70
80
90
100
1981 1984 1987 1990 1993 1996 1999 2002
East Asia & Pacific Europe & Central Asia
Latin America & Caribbean Middle East & North Africa
South Asia Sub-Saharan Africa
Source: Based on data from the 2006 WDI database
Note: 2002 data are preliminary
Poor and ultra poor in Asia 2004
and percent in South Asia
1$ - .75$/day: 372 million (71%)
.75$ - .50$/day: 213 million (77%)
Below .50$/day: 29 million (70%)
Source: Akhter Ahmend et.al. IFPRI, 2007
Towards urbanization of poverty?
199318.88
81.13
2002
24.67
75.33
urban share of the poor (%)
rural share of the poor (%)
Source: Ravallion et al., 2007
Note: Poverty line is set at $1.08/day
Urban and rural share of the poor (%)
Regional Hunger Trends
Source: Wiesmann, 2006
11.412.6
40.3
27.9
22.5
9.48.4
15.1
32
27.3
7.98.0
11.9
26.627
6.07.5
10.9
25.125.4
6.6 5.6
0
5
10
15
20
25
30
35
40
45
Sub-Saharan
A frica
So uth A sia So utheast
A sia
N ear East &
N o rth A frica
Lat in A merica
& C aribbean
Eastern
Euro pe &
F o rmer So viet
Unio n
GH I 1981
GH I 1992
GH I 1997
GH I 2003
Overview
1. Issues and conceptual framework
2. Drivers of agriculture and food
related globalization and impacts
on the poor
3. Policy and research implications
1) Markets and trade
1. Trade: Stagnation of developing countries‟ export shares,
more global integration on the import side
Agriculture trade in percent of production
Data source: World Bank, WDI 2005
Export/Production 1960s 1970s 1980s 1990s 2000-02
Latin America and the Caribbean 23.6 24.7 24.5 26.7 31.4
Sub-Saharan Africa a 28.5 23 17.2 15.3 13.2
Asia Developing 5.4 5.7 6.4 6.4 6.4
All Three Regions 12.1 11.8 11.3 11.0 11.6
Import/Production 1960s 1970s 1980s 1990s 2000–02
Latin America and the Caribbean 6.7 8.6 11.2 14 15.7
Sub-Saharan Africa a 8.1 9.4 12.6 12.3 13.5
Asia Developing 7.1 7.7 9.2 8.9 8.8
All Three Regions 7.1 8.0 10.0 10.1 10.5
a Does not include South Africa.
Regional trade trendsAgriculture trade in percent of total merchandise trade
Agr. Exports/Total Merchandize 1980 1990 2000 2003
Latin America and Caribbean 27.8 26.1 17.4 20.6
Sub-Saharan Africa a 19.8 20.0 15.2 16.9
East and Southeast Asia 13.3 7.7 3.7 3.8
South Asia 33.8 18.6 10.8 10.6
Data source: FAO, 2004; Note: a Does not include South Africa
Agr. Imports/Total Merchandise 1980 1990 2000 2003
Latin America and Caribbean 11.6 12.3 9.0 10.3
Sub-Saharan Africa a 15.4 16.3 17.1 17.9
East and Southeast Asia 14.2 8.0 4.8 4.7
South Asia 13.8 10.3 9.3 9.3
But: global increased trade in processed
and high-value goods
Data source: based on data from FAOSTAT 2006
World export value (billions of US$)
0
10
20
30
40
50
60
70
80
90
100
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
Coarse Grains
Fruits & vegetables
Meat
Milk
Small farms and small businesses
can participate
From a 2 ha. rice farm to fruit
processing firm
in Uttar Pradesh: training (her),
banking was key;
and the road
+25 jobs
Estimations of welfare benefits of trade
liberalization: studies 1999 - 2006
Source: Bouët, IFPRI, 2006
Two emerging global agro - markets
• Biofuels
• Carbon trading
Both entail opportunities and risks for the
poor‟s food security
Both require scaling up of R&D, incl. bio-
technology, to facilitate food security of
the poor and protection of resources
The biofuels boom World ethanol and bio-diesel production, 1975-2005
0
5
10
15
20
25
30
35
40
1975 1980 1985 1990 1995 2000 2005
Billio
n lit
ers
Source: Worldwatch Institute, 2006
Ethanol > 90% of biofuel production;
Brazil & US dominate ethanol market
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1991 1993 1995 1997 1999 2001 2003 2005
Billio
n lit
res
Bio-diesel: EU is the largest
producer & consumer
Plansannual growth in biofuel production …2010/12
• Ethanol: Biodiesel:
- USA: 16% USA: 19%
- EU: 45% EU: 37%
- Brazil: 8% Malaysia: 248%
- India: 15% Indonesia: 143%
- China: 3% Thailand: 70%
Source: USDA, 2006; 2007
Biofuels change the world food equation
Biofuel expansion will…
• accelerate globalization of agriculture
• raise land values, thereby draw capital
into rural areas
• create some jobs
• increase food prizes
Prices: Agricultural and energy prices
increasingly correlate
Source: IMF, 2007; OECD, 2005; World Bank, 2007
0
50
100
150
200
250
300
350
400
450
500
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
0
10
20
30
40
50
60
70Corn
Rice
Sugar
Oil seeds
Crude oil (right)
…and price variations are up
Carbon markets and Clean Dev. Mechanism
Allowances:
2005: 7.9 Bill. $ 2006: 24.6 Bill. $
Project based
2005: 2.9 Bill.$ 2006: 5.5 Bill.$
Agriculture only 1% of CDM offsets
Developing countries about 10% of CDM
Challenge: inclusion of the poor in this emerging
market
2) Investment & capital flows
Drivers:
(2) Investment and capital flows
0
20
40
60
80
100
Agriculture, hunting,
forestry and fishing
Food, beverages and
tobacco
Industrial countries Developing countries
Source: based on data from UNCTAD, 2004
FDI in food and Agriculture
as % of world total FDI
1990 and 2004
0
20
40
60
80
100
Agriculture, hunting,
forestry and fishing
Food, beverages and
tobacco
Industrial countries Developing countries
Transition countries
1990
2004
Poverty effects: FDI
• Other: Economic growth through forward and backward linkages + knowledge spillovers;
• government revenue from corporate taxes for pro-poor investmentsVietnam: FDI in rural areas, direct impact on poverty
insignificant (Nguyen, 2003)
Reduced
Poverty
FDI
Capital / Knowledge
Intensive Sector
Labor Intensive
Sector
Increased
Poverty
Unskilled labor Skilled labor
Source: von Braun (2007)
3) Information & innovation
Ongoing technological advances
Privatization of national telecom.
monopolies in many developing
countries in 1980s and 1990s
Drivers:
ICT and information flows
Drivers: ICT Revolution
Fixed line and mobile phone subscribers
(Per 1,000 people)
0
100
200
300
400
500
1975 1978 1981 1984 1987 1990 1993 1996 1999 2002
Data source: World Bank, 2006
Internet users
(Per 1,000 people)
0
50
100
150
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
World
Low income
Middle income
Poverty effects: ICT
(macro-level results)
• ICTs reduce transaction costs + open
markets + additional network externalities
• Tele-density is positively associated with
growth:
- 10 more mobiles per 100 people increase
GDP p.c. by 0.6% (Wavermann et. al., 2004)
- Minimum threshold: around 15% to get
strongest growth effects, actual is only 6%
Torero and von Braun, 2006
Science and technology
• Rapid expansion of R&D spending
needed for agriculture
• CGIAR and new global networks to play
key roles
0%
20%
40%
60%
80%
100%Middle East-North Africa
Latin America-Caribbean
Other Asia-Pacific
India
China
Sub-Saharan Africa
Developed
Global Public Agricultural R&D: 1981 and 2000
1981
$15.2 billion*
2000
$23.0 billion*
* in 2000 international prices
A changing environment for
innovation
• Introduction of patent rights for
agricultural inventions under TRIPS
agreement
• Bio-safety regimes and reduced exchange
(e.g. genetic resources)
- Technology spillover pathways to
developing countries for productivity
enhancement reduced
- Less global public goods research when
we need more of it (climate, etc.)
Relative roles of drivers?
• Markets and trade ?
• Investment ?
• Information and innovation ?
Strong demand (growth) forces change the
global food system
combined with
Institutional and organizational changes
Food
retailers
top 10:$777bln
• Wal-Mart
• Carrefour
• Royal Ahold
• Metro AG
• Tesco
C o
n s
u m
e r s
$4
,00
0 b
illion
The „corporate‟ global food system
Food
processors
and traders
top 10: $363 bln
• Nestle
• Cargill
• Unilever
• ADM
• Kraft Foods
Agricultural
input
industry
top 10: $37 bln
• Syngenta
• Bayer
• BASF
• Monsanto
• DuPont
Farms
Agricultural
value added:
$1,315 bln
450 million
>100 ha: 0.5%
< 2 ha: 85%
Source: von Braun, 2005
3. Policy implications for pro-poor
globalization: what can be done?
1. Domestic: the need for
complementary domestic policies in
developing countries to benefit from
globalization
2. International: the responsibility in
shaping the operation of a pro-poor
world economy in general and the
agriculture and food system in
particular
Re 1. national policies for pro-poor
globalization
• Peace and security
• Macro-economic policy
• Inclusion of the poor into the agri-food value chain
• Enhancing the agricultural innovation systems, R&D and education
• Public investment in rural areas, where the poor are (ICT, and infrastructure)
• Social protection, nutrition and health improvement
Re 2. international policies for pro-poor
globalization
• Global governance architecture of the food system
• Global trade policy reform
• International capital and aid flows
• Employment and social policies
• Global agriculture innovation and technology and environmental policy
A positive future for globalism with
a “values-based” approach
1. Overcoming divisiveness, between the two
globalization views: 1] narrowly focused
economic lens, and 2] unfocused systems
approach
2. recognition of interconnectedness of global
issues (poverty, environment, migration,
trade, failing states, terrorism, infectious
disease, political tensions)
3. commitment to international laws and
institutions and to domestic responsibilities