Globalization of Food and Agriculture

and the Poor: Driving forces,

Consequences and Policy Implications

Joachim von Braun

International Food Policy Research Institute

A Millennium Lecture at the

Hindu Media Resource Center of

MS Swaminathan Research Foundation,

Chennai, India, August 22, 2007

Overview

1. Issues and conceptual framework

2. Drivers of agriculture and food

related globalization and impacts

on the poor

3. Policy and research implications

Context of global change around

food and agriculture

1. Global economy‟s fast growth

2. Energy price and climate change

3. Health risks and agriculture

4. breakthroughs in science and

technology

5. Urban/rural change & migration

6. Governance and decentralization

a mix of opportunities and risks for the

poor in “globalization”

The problem with the globalization debates

Divisiveness between the two globalization views:

1] economic-lens approach, narrowly focused

2] unfocused systems approach, neglecting opportunities

and both have particularly distorted and dogmatic perspectives around

agriculture – food – poverty linkages

What is “globalization” of

agriculture and food?

A technical definition: Global integration—across national

borders—of production, processing, marketing, retailing, and consumption

of agriculture and food items

And what are the links to poverty?

Need for a conceptual framework that

connects globalization drivers to well

being at different levels…

• Global

• National and state

• Community and household

…to facilitate action

Conceptual framework: drivers and examples

of actions at different levels

Source: von Braun, 2007

MARKETS INVESTMENT &

CAPITAL FLOWS

INFORMATION &

INNOVATION

SOCIAL POLICY

LEV

EL

I

GLO

BA

LIZA

TIO

N

Exo

geno

us fa

ctor

s

Increased access to outputs, inputs, labor

Expansion of FDI

Improved ICTs

Innovation & IPR

Aid; human right to

food

LEV

EL

II

DO

ME

STI

C

PO

LIC

Y

Market opening

Competition policy

Political &

institutional changes

Technology policy

Public R&D investments

Pro-poor social

actions

LEV

EL

III

HO

US

EH

OLD

S

RIGHTS

PRICES

EMPLOYMENT HOUSEHOLD

ENDOWMENTS

PRODUCTION CONSUMPTION

The slow changes in poverty

• Slow reduction in income poverty

• Increased vulnerabilities

• Stagnation in nutrition improvements

• Growing in-equities

despite of of massive expansions of

opportunities under globalization

Mixed Evidence: Poverty headcount ratio at

$1 and $2 a day (PPP) as % of total population

Share of people living on less than $1 a day

(% of population)

0

10

20

30

40

50

60

70

1981 1984 1987 1990 1993 1996 1999 2002

East Asia & Pacif ic Europe & Central Asia

Latin America & Caribbean Middle East & North Africa

South Asia Sub-Saharan Africa

Share of people living on less than $2 a day

(% of population)

0

10

20

30

40

50

60

70

80

90

100

1981 1984 1987 1990 1993 1996 1999 2002

East Asia & Pacific Europe & Central Asia

Latin America & Caribbean Middle East & North Africa

South Asia Sub-Saharan Africa

Source: Based on data from the 2006 WDI database

Note: 2002 data are preliminary

Poor and ultra poor in Asia 2004

and percent in South Asia

1$ - .75$/day: 372 million (71%)

.75$ - .50$/day: 213 million (77%)

Below .50$/day: 29 million (70%)

Source: Akhter Ahmend et.al. IFPRI, 2007

Towards urbanization of poverty?

199318.88

81.13

2002

24.67

75.33

urban share of the poor (%)

rural share of the poor (%)

Source: Ravallion et al., 2007

Note: Poverty line is set at $1.08/day

Urban and rural share of the poor (%)

Regional Hunger Trends

Source: Wiesmann, 2006

11.412.6

40.3

27.9

22.5

9.48.4

15.1

32

27.3

7.98.0

11.9

26.627

6.07.5

10.9

25.125.4

6.6 5.6

0

5

10

15

20

25

30

35

40

45

Sub-Saharan

A frica

So uth A sia So utheast

A sia

N ear East &

N o rth A frica

Lat in A merica

& C aribbean

Eastern

Euro pe &

F o rmer So viet

Unio n

GH I 1981

GH I 1992

GH I 1997

GH I 2003

Overview

1. Issues and conceptual framework

2. Drivers of agriculture and food

related globalization and impacts

on the poor

3. Policy and research implications

1) Markets and trade

1. Trade: Stagnation of developing countries‟ export shares,

more global integration on the import side

Agriculture trade in percent of production

Data source: World Bank, WDI 2005

Export/Production 1960s 1970s 1980s 1990s 2000-02

Latin America and the Caribbean 23.6 24.7 24.5 26.7 31.4

Sub-Saharan Africa a 28.5 23 17.2 15.3 13.2

Asia Developing 5.4 5.7 6.4 6.4 6.4

All Three Regions 12.1 11.8 11.3 11.0 11.6

Import/Production 1960s 1970s 1980s 1990s 2000–02

Latin America and the Caribbean 6.7 8.6 11.2 14 15.7

Sub-Saharan Africa a 8.1 9.4 12.6 12.3 13.5

Asia Developing 7.1 7.7 9.2 8.9 8.8

All Three Regions 7.1 8.0 10.0 10.1 10.5

a Does not include South Africa.

Regional trade trendsAgriculture trade in percent of total merchandise trade

Agr. Exports/Total Merchandize 1980 1990 2000 2003

Latin America and Caribbean 27.8 26.1 17.4 20.6

Sub-Saharan Africa a 19.8 20.0 15.2 16.9

East and Southeast Asia 13.3 7.7 3.7 3.8

South Asia 33.8 18.6 10.8 10.6

Data source: FAO, 2004; Note: a Does not include South Africa

Agr. Imports/Total Merchandise 1980 1990 2000 2003

Latin America and Caribbean 11.6 12.3 9.0 10.3

Sub-Saharan Africa a 15.4 16.3 17.1 17.9

East and Southeast Asia 14.2 8.0 4.8 4.7

South Asia 13.8 10.3 9.3 9.3

But: global increased trade in processed

and high-value goods

Data source: based on data from FAOSTAT 2006

World export value (billions of US$)

0

10

20

30

40

50

60

70

80

90

100

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

Coarse Grains

Fruits & vegetables

Meat

Milk

Small farms and small businesses

can participate

From a 2 ha. rice farm to fruit

processing firm

in Uttar Pradesh: training (her),

banking was key;

and the road

+25 jobs

Estimations of welfare benefits of trade

liberalization: studies 1999 - 2006

Source: Bouët, IFPRI, 2006

Two emerging global agro - markets

• Biofuels

• Carbon trading

Both entail opportunities and risks for the

poor‟s food security

Both require scaling up of R&D, incl. bio-

technology, to facilitate food security of

the poor and protection of resources

The biofuels boom World ethanol and bio-diesel production, 1975-2005

0

5

10

15

20

25

30

35

40

1975 1980 1985 1990 1995 2000 2005

Billio

n lit

ers

Source: Worldwatch Institute, 2006

Ethanol > 90% of biofuel production;

Brazil & US dominate ethanol market

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1991 1993 1995 1997 1999 2001 2003 2005

Billio

n lit

res

Bio-diesel: EU is the largest

producer & consumer

Plansannual growth in biofuel production …2010/12

• Ethanol: Biodiesel:

- USA: 16% USA: 19%

- EU: 45% EU: 37%

- Brazil: 8% Malaysia: 248%

- India: 15% Indonesia: 143%

- China: 3% Thailand: 70%

Source: USDA, 2006; 2007

Biofuels change the world food equation

Biofuel expansion will…

• accelerate globalization of agriculture

• raise land values, thereby draw capital

into rural areas

• create some jobs

• increase food prizes

Prices: Agricultural and energy prices

increasingly correlate

Source: IMF, 2007; OECD, 2005; World Bank, 2007

0

50

100

150

200

250

300

350

400

450

500

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

0

10

20

30

40

50

60

70Corn

Rice

Sugar

Oil seeds

Crude oil (right)

…and price variations are up

Carbon markets and Clean Dev. Mechanism

Allowances:

2005: 7.9 Bill. $ 2006: 24.6 Bill. $

Project based

2005: 2.9 Bill.$ 2006: 5.5 Bill.$

Agriculture only 1% of CDM offsets

Developing countries about 10% of CDM

Challenge: inclusion of the poor in this emerging

market

2) Investment & capital flows

Drivers:

(2) Investment and capital flows

0

20

40

60

80

100

Agriculture, hunting,

forestry and fishing

Food, beverages and

tobacco

Industrial countries Developing countries

Source: based on data from UNCTAD, 2004

FDI in food and Agriculture

as % of world total FDI

1990 and 2004

0

20

40

60

80

100

Agriculture, hunting,

forestry and fishing

Food, beverages and

tobacco

Industrial countries Developing countries

Transition countries

1990

2004

Poverty effects: FDI

• Other: Economic growth through forward and backward linkages + knowledge spillovers;

• government revenue from corporate taxes for pro-poor investmentsVietnam: FDI in rural areas, direct impact on poverty

insignificant (Nguyen, 2003)

Reduced

Poverty

FDI

Capital / Knowledge

Intensive Sector

Labor Intensive

Sector

Increased

Poverty

Unskilled labor Skilled labor

Source: von Braun (2007)

3) Information & innovation

Ongoing technological advances

Privatization of national telecom.

monopolies in many developing

countries in 1980s and 1990s

Drivers:

ICT and information flows

Drivers: ICT Revolution

Fixed line and mobile phone subscribers

(Per 1,000 people)

0

100

200

300

400

500

1975 1978 1981 1984 1987 1990 1993 1996 1999 2002

Data source: World Bank, 2006

Internet users

(Per 1,000 people)

0

50

100

150

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

World

Low income

Middle income

Poverty effects: ICT

(macro-level results)

• ICTs reduce transaction costs + open

markets + additional network externalities

• Tele-density is positively associated with

growth:

- 10 more mobiles per 100 people increase

GDP p.c. by 0.6% (Wavermann et. al., 2004)

- Minimum threshold: around 15% to get

strongest growth effects, actual is only 6%

Torero and von Braun, 2006

Science and technology

• Rapid expansion of R&D spending

needed for agriculture

• CGIAR and new global networks to play

key roles

0%

20%

40%

60%

80%

100%Middle East-North Africa

Latin America-Caribbean

Other Asia-Pacific

India

China

Sub-Saharan Africa

Developed

Global Public Agricultural R&D: 1981 and 2000

1981

$15.2 billion*

2000

$23.0 billion*

* in 2000 international prices

A changing environment for

innovation

• Introduction of patent rights for

agricultural inventions under TRIPS

agreement

• Bio-safety regimes and reduced exchange

(e.g. genetic resources)

- Technology spillover pathways to

developing countries for productivity

enhancement reduced

- Less global public goods research when

we need more of it (climate, etc.)

Relative roles of drivers?

• Markets and trade ?

• Investment ?

• Information and innovation ?

Strong demand (growth) forces change the

global food system

combined with

Institutional and organizational changes

Food

retailers

top 10:$777bln

• Wal-Mart

• Carrefour

• Royal Ahold

• Metro AG

• Tesco

C o

n s

u m

e r s

$4

,00

0 b

illion

The „corporate‟ global food system

Food

processors

and traders

top 10: $363 bln

• Nestle

• Cargill

• Unilever

• ADM

• Kraft Foods

Agricultural

input

industry

top 10: $37 bln

• Syngenta

• Bayer

• BASF

• Monsanto

• DuPont

Farms

Agricultural

value added:

$1,315 bln

450 million

>100 ha: 0.5%

< 2 ha: 85%

Source: von Braun, 2005

3. Policy implications for pro-poor

globalization: what can be done?

1. Domestic: the need for

complementary domestic policies in

developing countries to benefit from

globalization

2. International: the responsibility in

shaping the operation of a pro-poor

world economy in general and the

agriculture and food system in

particular

Re 1. national policies for pro-poor

globalization

• Peace and security

• Macro-economic policy

• Inclusion of the poor into the agri-food value chain

• Enhancing the agricultural innovation systems, R&D and education

• Public investment in rural areas, where the poor are (ICT, and infrastructure)

• Social protection, nutrition and health improvement

Re 2. international policies for pro-poor

globalization

• Global governance architecture of the food system

• Global trade policy reform

• International capital and aid flows

• Employment and social policies

• Global agriculture innovation and technology and environmental policy

A positive future for globalism with

a “values-based” approach

1. Overcoming divisiveness, between the two

globalization views: 1] narrowly focused

economic lens, and 2] unfocused systems

approach

2. recognition of interconnectedness of global

issues (poverty, environment, migration,

trade, failing states, terrorism, infectious

disease, political tensions)

3. commitment to international laws and

institutions and to domestic responsibilities