Food Security, Domestic Policies and Trade Liberalization Linda M. Young Dept. of Agricultural Economics December 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

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

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

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%  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) World Bank total 55 between

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