GLOBAL – Major global disruptions such as the recent COVID-19 pandemic outbreak, locust invasion and climate change have proven that global systems which promote global trade are integral part of economic growth, sustainable development and strengthen resilience to shocks.
“We need to rely on markets as an integral part of the global food system. This is all the more important in the face of major disruptions, whether they come from COVID-19, locust outbreaks or climate change,” said FAO Director-General QU Dongyu in his introduction to the report.
According to a recent report by FAO, State of Agricultural Commodity Markets 2020 (SOCO 2020), the global agri-food trade has more than doubled since 1995, amounting to US$1.5 trillion in 2018.
Emerging and Developing countries increase their trade volumes
The rise in agri-food trade can be partly attributed to emerging and developing countries’ increasing their commodity exports, accounting for over one-third of the world’s total export.
Upper and lower middle‐income countries together have increased their share in global agri‐food exports from about 25 percent in 2001 to 36 percent in 2018.
The developed countries in Europe and Central Asia, and East Asia and the Pacific, on the other tend to trade within the same regions.
The report has however indicated that regional trade agreements can stimulate global value chain participation and spur institutional and policy reform.
Income growth, lower trade barriers, technological advancement promote trade
The rise of global value chains has also been driven by income growth, lower trade barriers and technological advancements, which have transformed markets and trade processes, linking farmers to traders and consumers across regions and countries.
“Global value chains can make it easier for developing countries to integrate into global markets. As they link our food markets closely, they also provide a mechanism to diffuse best practices to promote sustainable development,” said the FAO Director-General.
By participating in global value chains, smallholder farmers can boost their food production and income. On average and in the short term, a 10 percent increase in agriculture’s global value chain participation can result in an increase of around 1.2 percent in labour productivity, finds the report.
Other factors that have been highlighted by the report as driver of global-food trade are technological progress; urbanization; population and income growths; lower transport costs; trade policies and a decline in average import tariffs.
Set-backs in global value chains and remedies
Even with the rise in global trade, global value chains with stringent food quality and safety requirements have been found to hinder trade, marginalizing smallholders.
“We need to redouble efforts to include smallholder farmers in modern food value chains, thus securing rural incomes and food security in both rural and urban areas,” said Qu.
To achieve this, the report has indicated that there is a need for broad policies to create an environment that enables markets to flourish and bolsters smallholders’ participation in global value chains – for example, better rural infrastructure and services, education and productive technology.
Also, digital technologies can help markets to function better and can improve farmers’ access to them.
Innovations, such as food e-commerce, can benefit both farmers and consumers. However, to guarantee that the dividends of digital innovation are shared with the poorest, the current digital divide in agriculture needs to be reduced, indicated the report.
The adoption of more inclusive business models, such as contract farming and blockchains, can also help farmers to better integrate into modern and more complex value chains.
For example, participation in contract farming can increase farm income by more than half – based on an analysis of main studies on contract farming.
The report underlines, however, the overall lack of information on the different impacts of contract farming, apart from its impact on farmers’ welfare.
As the larger part of agri‑food trade is made up of processed food products, the report argues that the promotion and wider application of voluntary sustainability certification schemes and standards in agriculture, for example, can address trade‑offs between economic, environmental and social objectives.
They also can ensure occupational safety, ban child labour, and encourage investments.
Impact of COVID-19 on global trade
Whilst global agri-food trade has doubled since 1995 in real value, its growth rate has been slower since the 2008 financial crisis. This is expected to be further impacted by the COVID-19 pandemic.
The 2008 financial crisis and consequent economic slowdown stalled the evolution of agri-food global value chains, and the COVID-19 pandemic could further disrupt their potential in global trade and growth.
Trade will continue to play an important role in global food security and nutrition, by moving food from surplus to deficit regions.
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