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.
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.
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.
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.
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.