Food Security, Domestic Policies and Trade Liberalization

Linda M. YoungDept. of Agricultural EconomicsDecember 3, 2003

What is food security?

“Secure access at all times to sufficient food for a healthy life” Sufficiency: enough food for a healthy life, not

just survival Access: determined by individual resources

Derived from human and physical capital Security: chronic, transitory or cyclical

insecurity Appropriate unit of measure is the

household

Distribution of Income or Consumption

Percentage Share of Income or Consumption Economy

Gini Index

Lowest 20%

Second 20%

Third 20%

Fourth 20%

Highest 20%

Norway 25.2 10.0 14.3 17.9 22.4 35.3

Indonesia 36.5 8.0 11.3 15.1 20.8 44.9

United States 40.1 4.8 10.5 16.0 23.5 45.2

China 41.5 5.5 9.8 14.9 22.3 47.5

Nigeria 45.0 4.0 8.9 14.4 23.4 49.3

Russian Federation 48.0 4.2 8.8 13.6 20.7 52.8

Mexico 53.7 3.6 7.2 11.8 19.2 58.2

Brazil 60.1 2.5 5.7 9.9 17.7 64.2

Sierra Leone 62.9 1.1 2.0 9.8 23.7 63.4

Food Gaps

Food availability: Grain and root production, imports and food aid

Status quo: maintain per capita consump.

Nutritional req.: to meet min cal/day Distribution gap: needs accounting

for income distribution (lower income quintiles lower per capita availability)

Food Gaps: 2002 and 2012 (1,000 tons)

D = Distribution

2002 2012 Status

Quo

Nutrition

D Status

Quo

Nutrition

D

Sub-Saharan Africa

6,437 15,726 19,782 9,711 14,067 20,445

North Africa 0 0 0 819 0 0

Asia 273 1,085 9,051 628 2,262 3,896

Latin America and Caribbean

134 817 2,230 171 592 880

Newly Independent States (NIS)

0 110 252 0 6 96

TOTAL 6,845 17,738 31,315 11,328 16,928 25,318

20–50 percent of population living on $1/day

50+ percent of population living on $1/day

20–50 percent of population living on $2/day

50+ percent of population living on $2/day

War: increase in “protracted emergencies”

During war: Producers forced off the land Holding camps

Distribution of food aid May lower prices

Supply channels disrupted Foreign exchange diverted Food as a weapon

Source: Gleditsch and others (2002); UNHCR (2002).

The Stock of Refugees and Civil Wars, 1951–2001

Source: Collier, Hoeffler, and Söderbom (2003).

Duration of Civil Wars over Time

Chronic Hunger Measures have huge

shortcomings Hunger without

disruption to production Famine occurs in times of

economic expansion Amarta Sen :

Think about entitlements Individual endowments Changes in endowments

(loss land, labor) Changes in entitlement

mapping (prices, wages, loss of employment)

Child Malnutrition under Low and Medium Population Projections, 2000

Source: IFPRI IMPACT projections, June 2001

Region

Low UN Projection

Medium UN Projection

Difference

millions of malnourished children

South Asia 47.6 63.3 15.7

Southeast Asia 10.3 14.0 3.7

East Asia 6.2 8.5 2.3

Sub-Saharan Africa 33.7 39.3 5.6

Latin America 1.5 2.5 1.0

West Asia/North Africa 3.0 4.0 1.0

Developing Countries 102.3 131.5 29.2

AIDS and Food Security

3.5 million orphans 36 million people with

AIDS-95% in developing countries

Mortality 10X that of war

SSA:>10% HIV positive

Impact on Food Security

Loss of 7 m ag workers Rural communities hard

hit dependents per worker Social customs

perpetuate-brother marry the widow

Women: vulnerable

How to Achieve Food Security

Food security enhanced by:• Domestic production

• Not self-sufficiency• Ability to import

• Contingent on adequate exports

• Poverty alleviation• More income equality• Safety nets

• Peace and good governance critical

Taxing Agriculture

Developing countries taxed agriculture Transfer out of agriculture 45% 1960-84 Why:

terms of trade in world markets, developed country protectionism

Agriculture: thought price unresponsive (involvement

in markets low), wanted technical change in industry

Cheap Food Policies:

Low food prices for urban areas (no food riots) Subsidized industry

Consequently: Low producer prices Food aid accepted –ie: India Industrial subsidies discouraged ag investment Overvalued exchange rates, differential

exchange rates-discouraged exports

Trade Liberalization for Poor Countries

• Result of ‘structural adjustment’ programs• World Bank and IMF

• What happened?• Debt crises• Bail out required

• How many countries ?• 35 countries (agriculture) 1979-1993• World Bank total 55 between 1980-90

Elements of Structural Adjustment“The Washington Consensus”

• Trade liberalization plus• Fiscal discipline-deficits reduced,

expenditures reprioritized• Exchange rate devaluation• Foreign direct investment

encouraged• Privatization

What did this mean?

• Food subsidies abolished• Low world prices into developing

country markets for agriculture• Input prices increased• Unemployment high – lack of

flexibility• No safety net for unemployed• Example: abolition of parastatals

Successful Policies: Mexico and Progressa

• Ended universal tortilla subsidies 1999• Universal subsidies inefficient, costly• Food large expense vis a vis income

• Progressa• Cash grants to poor rural household

• Children must attend school• Household visit health clinics, workshops

Progressa continued

• Free basic health care, prenatal care, nutritional supplements for children, money for food

• Conditional on attendance at workshops and health clinics

• Financial transfers to women• Higher assistance for girls in school

Research on Gender

• Mother’s education critical• Egypt-increasing mother’s education-

to complete primary school reduces % living below poverty line by 33%

• Women devote more to children’s nutrition

• Increasing women's assets and access to land and capital

• Women at nutritional disadvantage

Keep Criteria in Mind

Go back to what we need for food security: Agricultural production-enough Exports to allow imports when needed Poverty alleviation-reduction of income

inequality Safety nets

Idea Behind Trade Liberalization

• Comparative advantage• Specialize in what you are good at producing

• Remove government interference from the market

• Occurred extensively in manufactured goods

• Many rounds of negotiation through the GATT

• Agriculture had been a special case• Negotiations started in 1986

Benin, Burkina Faso, Chad and Mali: Cotton Initiative

All west African cotton exporters World price depressed due to US cotton

policies (also EU, China) US cotton policies include marketing loans

and ‘decoupled support’ Advanced proposal at the Cancun

Ministerial that the U.S. and other countries would Phase out support for their cotton

producers Over three years

Compensation

Provide compensation to cotton-producing LDCS to offset lost revenue during this transition to local cotton producer associations

Compensation Losses calculated at 250 million direct, with indirect 1 billion

Compensation decreases as subsidies decrease

Want to benefit from their comparative advantage

Developed Country Agricultural Subsidies

IFPRI: Subsidies displaced some US$40 billion

in net agricultural exports and reduced incomes in those countries (spin offs and dynamic effects not included

½ due to EU 1/3 due to US 1/5 due to Japan

If All Industrialized Countries Liberalized Their Policies…

Increase in incomes (ag and agro-industrial) in % of income China-1.5 Thailand-11 Carribean-9.5 Boswana-14.6 Zambia-5

It would have an impact But is not enough

Conclusions

Overall, food security has improved but Still problematic, SSA, South Asia Trade and trade policy can make a

difference Domestic conditions matter-a lot

Good governance (Peace!) Institutions, education, poverty alleviation,

reducing income inequality, health care

Least developed countries have become major net importers of agricultural products

Share of food imports in total apparent food consumption