The Developing Countries’ Emerging Role in the Global Market Robert L. Thompson Chairman International Food & Agricultural Trade Policy Council 24 May 2005

Global Demand for Food Population growth will add about 50% more mouths to be fed by Food is the largest expenditure category of the poor. Very low income people spend the first increments to their income on the necessities of life, especially food. Broad-based economic growth will likely add as much to global food demand as population growth. World food demand could double by 2050.

Projected Population Growth (U.N. medium projections) Region World 6,378 8,919 High Income 1,206 1,220 Low Income 5,172 7,699 Africa 869 1,803 Asia 3,871 5,222 Latin America

Pervasive Poverty 1.25 billion people live on less than $1 per day; 70% of them are rural, and most of these depend on farming, forestry or fishing for the meager incomes Of these, 840 million people suffer under-nutrition or hunger. 3 billion (half of the world’s population) live on less than $2 per day. Hunger is due mainly to poverty except in times of war, natural disaster or politically-imposed famine. Broad-based economic growth that reduces poverty will solve most hunger – and add substantially to world food demand.

Two Dollars Per Day Poverty

Income Growth Creates Demand Very low income people spend the first increments in purchasing power on the needs of life, esp. food staples. As incomes rise further, diets start to change with addition of fruits, vegetables, edible oils; animal protein By $3,000 per capita income, people start to purchase processed and packaged foods In rich countries further income growth adds little to total demand for agricultural products, but the mix of what products are consumed may change and demand for further processing, convenience, and packaging rises.

Huge Market Growth Potential from Poverty Reduction CountryPopulation% < $1/day% < $2/day China India Indonesia Pakistan Bangladesh Source: World Bank. World Development Indicators database

Growing Agricultural Trade The world’s arable land is not distributed around in the world in the same proportions as is population. (No way for Asia to be self-sufficient) Agriculture in most LDCs is underperforming relative to its potential. With population growth, urbanization and broad-based economic development in LDCs, more of world food production will move through trade. Greater trading opportunities for LDCs would accelerate their economic growth and expand their food consumption faster than production, increasing their food imports.

The World’s Arable Land (left) Is Distributed Very Differently than Its Population (right)

Trade Liberalization Is Key to Poverty Reduction A more open trading environment can stimulate faster economic growth Trade a more powerful engine of growth than aid Trade liberalization can benefit the LDC poor, but need pro-poor development strategy, adjustment assistance, and green box public good investments.

What Developing Countries Need from OECD Countries Market access for goods in which developing countries have a comparative advantage Eliminate import barriers and domestic and export subsidies which depress world market prices and increase their variance Foreign aid and World Bank loans for investment in necessary infrastructure, technology, know-how, etc. and to facilitate adjustment.

Why the Development Focus in the the Doha Round? Expect 50% world population growth from 2000 to all in low income countries Persistent poverty can have adverse geopolitical effects. Developing countries are the only potential growth market for agricultural exporters. It is the “right thing to do.” Developing countries are now the majority of WTO members; there will be no agreement until they perceive something of value to them in it.