In 2020 the world will reach a critical milestone: just over half of the world’s population will be considered middle-class with sufficient discretionary income to purchase more goods and services, and most importantly to diversify their diets.1  As the population surpasses this global income “tipping point,” more consumers will demand higher-quality foods.  Improving the availability of nutritious, sustainable agriculture products for them through trade will be imperative.

But what of the remaining half of the population who are vulnerable or poor? Getting it right on trade will also be required to ensure that food insecure populations have sufficient, nutritious affordable food. Connecting small-scale and emerging farmers with regional and global markets supports the achievement of UN Sustainable Development Goals (SDGs) for eliminating poverty and hunger.

This chapter describes how trade facilitation, innovation and investments can improve food security and diet diversity. Through improved access to services and innovations in agriculture, education and markets, consumers and farmers in low-income countries can improve their health and welfare and lead more healthy, comfortable lives.

Between 1995 and 2014, world agricultural trade doubled in real terms due to trade liberalization (reduction of tariffs, quotas and regulatory barriers).2 In general, the agriculture sector has benefited from increased trade, but it still faces many barriers and progress lags compared to trade in other sectors.

Amplifying the Benefits of Trade in Agriculture

Getting sustainable nutritious and safe food to consumers requires trade policy frameworks that are forward-looking, innovative and inclusive to benefit the entire agri-food system and the environment. Improving trade policies and infrastructure will enable consumers around the world to access a variety of foods, as well as staple foods, at competitive prices. More trade will also create employment opportunities along the agricultural value chain and in supporting industries.

Countries differ in their ability to meet their needs for nutrition due to lack of investment or lack of productive land and water. Research indicates that the ability of many countries, particularly low-income countries, to meet their aggregate nutritional needs today would be less without trade; a “no-trade scenario” reveals greater inequality among countries in their potential to meet national nutrition requirements.2   Tariffs and other forms of trade barriers raise the costs of food and reduce food choices for countries and people who need nutrition the most.3

What is “Free Trade”?

Trade policy is made up of rules and regulations that governments put in place to facilitate the free and transparent movement of goods and services across national borders.

Ideally, government policymakers work in concert with other governments to:

  • Reduce tariffs, quotas and export taxes;
  • Harmonize international standards and greater transparency of sanitary/phytosanitary measures and food labels;
  • Protect intellectual property rights;
  • Create dispute settlement mechanisms;
  • Reduce subsidies;
  • Expedite the movement, release and clearance of goods and cooperation between customs authorities (trade facilitation); and,
  • Support infrastructure development and capacity for trade (transportation routes and storage facilities, export promotion agencies).5

Free trade must also bring more benefits to producers, the environment and to consumers and be made more inclusive and sustainable.

Building Trade Capacity

Guyana food safety sector professionals participate in a technical workshop to increase their capacity to strengthen the Codex Alimentarius structure in Guyana. The project, led by Chile, IICA and USDA, achieves stronger Codex systems, not only in Guyana but also in Jamaica, Trinidad and Tobago, Saint Lucia and Suriname. Photo credit: IICA

The Inter-American Institute for Cooperation in Agriculture (IICA) is the specialized agency of the Inter-American System for agriculture, with 34 member states across the Western Hemisphere. IICA, in partnership with other regional institutions such as the Inter-American Development Bank and with the U.S. Department of Agriculture (USDA) and U.S. Agency for International Development (USAID), invests in institutional, human, financial and technological resources to build member countries’ capacities to harness the power of trade.

In 2009, IICA formed a partnership with USDA to implement a long-term plan to build capacities of Latin American and Caribbean countries to participate in Codex processes and effectively harness agricultural and food trade. Through IICA’s Agricultural Health and Food Safety Program, countries gain a better understanding of the multiple and complex Codex committees to participate in and make better use of opportunities for engagement.

The program has enabled countries to promote standards of national or regional interest, defend their positions and improve their national policy and technical structures. This has resulted in substantial improvements in the capacity of Latin American countries to take advantage of Codex, ensuring that the region is more united and informed on trade matters, and that their efforts to improve agricultural trade among themselves and with other regions are better coordinated.

Beyond Borders: COMESA Facilitates Regional Trade

Regional economic communities in Africa are developing agricultural commodity and seed standards within each of their membership zones that will eventually be harmonized across the respective regions.

The Common Market for Eastern and Southern Africa (COMESA) is building its 19-member countries’ potential to meet most of the food and agriculture needs of 500 million people. But to do this, its farmers must be able to gain better access to improved inputs such as seeds, mechanization and fertilizers, as well as to the technologies and skills to grow and add value to these agricultural goods.

Quality improved seed developed for regional and local conditions gives small and medium-scale farmers the highest return for their investment. In 2013, COMESA countries established a regional seed release system to reduce regulatory inconsistencies that have led to artificial barriers to breeding, production and distribution of improved seeds.  The goal of the COMESA harmonization plan is to create by 2020 a vibrant and high-growth seed industry, resulting in improved crop yields for 80 million smallholder farmers in COMESA countries.

By harmonizing seed regulations and standards across borders, regional seed companies can sell the same seeds to a larger market, rather than developing different varieties for each country. Seed for sale in Luchenza, Malawi. Photo Credit: B.Baulch/IFPRI Malawi, 2018.

The plan establishes a common seed catalogue and sets regional rules for seed variety release, seed certification, and sanitary and phytosanitary (SPS) measures to protect people, animals and plants from pests and diseases. In 2017, seed labels and certificates were introduced as the next step to certify the seeds in accordance with the harmonization plan.

COMESA is also facilitating regional trade in maize, a critically important food security crop for all its member countries. Standards vary across countries: for example, allowable moisture content for imports of maize is set at 13 percent in Tanzania, 13.5 percent in Kenya and 14 percent in Uganda. The tolerance for insect damage is one percent in Uganda, two percent in Kenya and three percent in Tanzania. Without mutual recognition of standards and certificates of analysis, regulatory barriers persist, causing an unpredictable trading environment and costing producers and traders money, as well as contributing to cross-border illegal and informal trade, now estimated at over 80 percent in some COMESA countries.

A COMESA Mutual Recognition Framework (C-MRF) signed in 2015 in Kampala, Uganda, has launched a pilot program to standardize maize testing among six exporting and importing countries (Kenya, Malawi, Rwanda, Uganda, Zambia and Zimbabwe). Among the C-MRF key components are common grading criteria, proficiency testing for aflatoxin (toxic compounds from food mold) and a risk-based sampling protocol.

Harmonizing Trade for Food Safety

For societies to benefit from trade, agreements must focus on more than integrating logistics and trade rules. Equally important is the harmonization of standards, particularly for labor, for food safety and food security, for the environment and for communities that may not be realizing the full benefits of some trade agreements.

Photo credit: IICA

The Codex Alimentarius, or the food code, is a collection of internationally recognized standards, codes of practice, guidelines and other recommendations relating to foods, food production and food safety. Codex plays a key role in world trade and in the protection of consumers’ lives and health, as standards are based on the best available science.

The Codex Alimentarius Commission is a joint body of the Food and Agriculture Organization of the United Nations (FAO) and the World Health Organization (WHO) with goals of protecting the health of consumers and of ensuring fair practices in international food trade. A growing number of low-income countries are taking an active part in the Codex process and are participating in Commission meetings to compete in sophisticated world markets and improve food safety for their own populations.

Governments see benefits for health and trade in implementing Codex standards, and farmers who follow them know that their produce can be sold at home and abroad. Compliance by exporters ensures that consumers can trust the safety and quality of foods, and traders are protected from losing money from substandard shipments.

Partnerships Promote Safe Food and Reliable Trade Systems

As global food trade increases, governments need food safety and inspection systems to protect consumers from food-borne illnesses.

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Keeping Labor and the Environment in Focus in Trade Agreements

Trade agreements need to include investments in social protection and capacity building, as well as ensure that productive resources in agriculture such as land, water, forests and wildlife are sustainably managed and protected.

Bilateral or smaller regional free trade agreements (FTAs) provide economic benefits but they often have little influence on standards covering labor, environment and best business practices. With the global Doha Round of the World Trade Organization (WTO) talks currently stalled, the prospect of developing more deeply integrated regional agreements are being explored.  Developing regional markets and multilateral agreements help create economies of scale necessary to expand business opportunities, stimulate local supply chain development and connect producers to international markets. Strong economic benefits accrue from implementing such agreements.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), also known as TPP-11, is a signed trade agreement pending ratification by 11 countries that represent 13.4 percent of the global gross domestic product ($13.5 trillion).   An additional seven countries have indicated interest in eventually joining (including the United States who withdrew from the agreement in 2017).

Once ratified and in effect, it will become one of the largest trade agreements in the world after the North American Free Trade Agreement (re-negotiated and re-named the U.S.-Mexico-Canada Agreement, or USMCA).  Such multilateral agreements aim to eliminate thousands of tariffs and establish shared approaches to intellectual property, labor and environmental laws.

Consumers and workers are calling for more environmental and labor benefits along with protection of wildlife in such trade agreements.

The CPTPP enhances the abilities of countries to enforce laws against wildlife trafficking and will help prevent trade in fish products from illegal, unreported and unregulated (IUU) fishing sources.  It also improves global efforts to abolish child labor and gender discrimination present in many agricultural systems throughout CPTPP countries and protects collective bargaining.

On the energy front, the agreement boosts the adoption of more clean energy by cutting tariffs on renewable energy technologies and helping signatory countries shift to renewable energy.

The Next Step in North American Trade

The recently announced USMCA trade agreement between Canada, Mexico and the United States partially updates the 25-year old North American Free Trade Agreement (NAFTA) by imposing new obligations for enhanced environmental polices and labor practices and fostering digital trade.  These provisions were patterned on the high standards of the original TPP agreement and set good precedent for future trade accords.

For agriculture trade, the USMCA agreement removes some distortions in Canadian pricing for dairy products, which should help U.S. dairy farmers export to Canada, although the amount of total reduction in barriers for agriculture products is small.  Trade for most agricultural goods across the regions remains at the zero-tariff level, thereby continuing the existing market access.  The removal of trade barriers has meant that nutritious foods are always in season;   the volume of fruits and vegetables shipped from Mexico to the U.S. has tripled since 1994, when NAFTA was originally created and ratified.

A 10-year, $5.4 billion expansion of the Panama Canal has tripled the original capacity and facilitated trade, allowing ships carrying up to 14,000 containers to travel more quickly between Asia and the United States.

Productivity Feeds Rising Global Demand

For high-income countries with highly productive agriculture systems, trade benefits producers by ensuring their sustainably produced goods reach new global consumers and help meet the rising demand for more nutritious food, feed for livestock, fiber for clothing and household goods and biofuels.

Figure 1
For example, as recently as 1989, the U.S. was a net importer of pork, while today it is a net pork exporter, reaching more than 100 countries. Consumers in global markets trust the safety and quality of U.S. pork products and demand continues to grow.
In 2016, the U.S. shipped $2 billion in pork products to Mexico and Canada.  China, Japan and South Korea are also major importers of U.S. pork.

Ensuring that trade is open, fair and based on common scientific standards with low tariffs will enable U.S. farmers to sustainably meet the growing demand for pork and other livestock products among the expanding consumer classes in Asia and Mexico.

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