global public goods in the food system: implications for rapidly modernizing food markets laurian j....
TRANSCRIPT
Global Public Goods in the Food System: Implications for Rapidly Modernizing Food
Markets
Laurian J. UnnevehrProfessor, University of Illinois
Presentation at the CCAP 10th Anniversary ForumChina's Agriculture and Food Economy in
the 21st Century
CCAP 10th Anniversary Forum
Global Context for Agricultural Markets
• Globalization of the food system and changes in demand bring “deep integration” of markets
• Risks and benefits now cross borders more often, creating demand for global public goods
• Risks and benefits share similarities across developed and modernizing food systems
• Challenges us to carry out policy analysis on familiar issues in new ways
Globalization In the Food System
CCAP 10th Anniversary Forum
Agricultural Trade has Grown Faster than Production
Trade 3.8%
Production 2.0%
Average Annual Percentage Change 1990 to 2002Source: WTO
CCAP 10th Anniversary Forum
Income Growth and Urbanization Drive Food Demand Changes
• More meat, fish, fruits and vegetables
• More processed, branded products
• Higher, uniform quality
• More services
CCAP 10th Anniversary Forum
Source: Senauer and Goetz, 2003
0
5
10
15
20
25
Staples Fruit &vegetables
Meat & Dairy Food Service
Poor
Poor
Poor
Poor
Rich
Rich
Rich
Rich
An Example from Lima, Peru in 2000
As Incomes Grow, Demand for Meat, Produce, and Food Service Increases
Mon
thly
Food
Exp
en
dit
ure
s in
US
$
CCAP 10th Anniversary Forum
Demand Shapes Globalization Trends
• Market growth and integration faster for high-value products
• Increasing specialization of production to meet growing demand for high value perishables
• Growth in food service, retailing leads to more uniform quality standards
CCAP 10th Anniversary Forum
0
50
100
150
200
250
300
350
400
450
500
Va
lue
(m
illio
ns
of
do
llars
) High Valued Products
Bulk Commodities
High Valued Products Lead Growth in World Agricultural Trade
Source: FAOSTAT
CCAP 10th Anniversary Forum
Specialization in Agricultural Production and Trade
Product High Income Countries
Developing Countries
Labor-intensive
Fish 9,857 -7,044
Fruit & Veg 33,195 -43,198
Land-intensive
Meat -3,031 1,591
Cereals -119,197 113,151
Net imports million MT, 2000
Source: FAOSTAT
CCAP 10th Anniversary Forum
Supermarkets Increase Food Retail Share in Growing Economies
CCAP 10th Anniversary Forum
The New Realities of Consumer Demand and Globalization
High-Valued Products
Enter World Markets For StandardizedRetail Outlets
CCAP 10th Anniversary Forum
Global Adoption of “Meta-Standards” for Quality and Product Information
• Need to ensure uniform quality and to provide product information
• Adoption of internationally recognized systems of quality control for certification
• Increased use of tracking and testing technologies
• Result is increasing “deep integration” of methods of production
CCAP 10th Anniversary Forum
Integration and Fragmentation in Global Food Markets
INTEGRATION• More trade &
specialization
• Shared benefits, risks
– animal & plant health, food safety
– new technologies
FRAGMENTATION• Continued market
protection
• Non-tariff market barriers
– Risk standards
– Intellectual property rights
– Labeling policy
Consumer Demand Meets Globalization:Food Safety
CCAP 10th Anniversary Forum
Food Produced in One Country Must Meet Standards in Another Country
Fish Market in India
Fish in U.S. Supermarket
CCAP 10th Anniversary Forum
Changes in Animal and Fish Production Towards Larger Units
Increased scale of production can introduce new hazards or speed the spread of existing ones.
CCAP 10th Anniversary Forum
Some foodborne hazards can enter the food supply chain at many points and can multiply once present.
Controls must address the entire system from farm to
table.
Mixing food from different sources increases the potential to spread microbial contamination.
Controls Linked Throughout the Supply Chain
CCAP 10th Anniversary Forum
As More Food is Purchased Away from Home…
• Consumers have less control over food preparation
• Industry takes greater responsibility for final safety of food when consumed
• Especially in rapidly urbanizing food markets Deli Salads in a Supermarket
CCAP 10th Anniversary Forum
Food Safety Controls Shared Responsibility
• Shared public and private responsibility
• Shared international responsibility across regions and international borders
• Shared by all participants in supply chain
• Who bears costs and risks?
CCAP 10th Anniversary Forum
Mad Cows and Sick Birds
• Managing “mad cow” (BSE) disease:– Strong consumer reaction– High costs for producers– Imperfect scientific understanding of the risk– Trade patterns make management a regional and
global public good
• Is Avian influenza (HPAI) another similar emerging risk?
CCAP 10th Anniversary Forum
Global Institutions for Managing Food Safety
• Sanitary and Phytosanitary (SPS) agreement under the WTO sets these principles for standards– Transparency– Science-based– Equivalence– National sovereignty– Harmonization
• These principles have worked to reduce trade barriers, but many challenges remain.
CCAP 10th Anniversary Forum
Food Safety – Challenges for Agricultural Economists
• When would coordinated risk management reduce the costs of control?
• How to compensate increased costs in one country that provide risk reduction in another country?
• How to balance costs and benefits in rapidly modernizing food systems?
Consumer Demand Meets Globalization: Genetically Modified Foods
ReadingLivestockDNA sequence
GeneticModificationOf CastorBeans
CCAP 10th Anniversary Forum
GM Crops with Global Impact: Bt Cotton
Bt cotton in: Yield Effect• United States 0 – 15%• China 10% • South Africa 20% – 40%• India 60% – 80 %
• Chemical use reduced in every country.
Source: Zilberman et al., 2004
CCAP 10th Anniversary Forum
But Consumers Want to Know How Their Food is Produced
• Farmers in Iowa, New South Wales, and Brazil under scrutiny from consumers in Europe and Japan
• Labeling rules for GM foods in most major markets
• Productivity gains are not only criteria for technology choice
CCAP 10th Anniversary Forum
GM Crop Going Nowhere: Bt Potatoes
• Bt potatoes to repel major pest marketed by Monsanto
• Only adopted on 15% of US acreage
• In 2000, McDonalds decides no GM in fries
• Monsanto withdraws from market
• Lost potential for low income agriculture?
CCAP 10th Anniversary Forum
Global Institutions to Manage Biosafety of GM Foods
• Extending Global Recognition of IP Rights– Eg., Trade Related Aspects of IP Rights (TRIPS) under WTO
• Health Risks– Labeling and traceability requirements for GM foods differ in
EU, Japan, and Australia
• Environmental risks– Cartegena Protocol sets standards for sharing information in
trade
• Clear differences remain in regulatory approaches
CCAP 10th Anniversary Forum
Different Mandatory Labeling Requirements Have Different Cost Implications
EU Japan Australia/NZ
Only if novel protein in final product?
NO YES YES
Tolerance level?
0.5% 5% 1%
Traceability/ IP required?
YES YES Only for negative claim
Green = least costly Red = most costly
CCAP 10th Anniversary Forum
Genetically Modified Foods– Challenges for Agricultural Economists
• How can labeling regimes be designed to be most useful to consumers and least disruptive to markets?
• How can we measure the value of risk avoidance versus the value of new technologies?
• What do emerging regulations mean for incentives to develop and adopt new technologies in modernizing food systems?
CCAP 10th Anniversary Forum
China’s Rapidly Modernizing Food System
Meat ProcessingLocal Markets
Public Health
Supermarkets
CCAP 10th Anniversary Forum
China’s Rapidly Modernizing Food Markets
• Urban consumers increasingly demand high value products and services
• Intensifying livestock production means new demand for food safety and disease control
• Exports of seafood, fruits and vegetables important and growing
• Development and adoption of GM crops and livestock well underway
CCAP 10th Anniversary Forum
Questions for China’s Rapidly Modernizing Food Markets
• How to facilitate participation by small farmers in increasingly coordinated marketing chains?
• How to facilitate private sector response to demand for safety, quality, information?
• How to respond to export markets and to participate in international rule setting?
• How and at what point in development to protect domestic consumers?
CCAP 10th Anniversary Forum
Closing Comments-- Implications for Our Research
• “Goods” and “Bads” from modernizing food systems are increasingly global in nature
• Shared risks, benefits will shape future food system and food policy
• Challenge for countries now modernizing to exploit benefits of these trends and to minimize costs