INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
IFPRI
Theme 5
Globalization – What’s in it for the Poor in Terms of Water and
Food Security?
EWRI, Anchorage2005
IFPRI
Theme 5
Forces outside of the water sector are changing water management rapidly today and into the future – they include globalization, trade,and climate change
GLOBALIZATION, WATER & FOOD
IFPRI
Theme 5
Changes in Global Water & Food Demand
Globalization - Food Security
The Role of Trade• Example of Indonesia• Virtual Water• MFA• International Agreements and FDI
Some Conclusions
OUTLINE
IFPRI
Theme 5
CHANGE IN GLOBAL WATER AND FOOD DEMAND
IFPRI
Theme 5
1,092
684
1,804
803
0
500
1,000
1,500
2,000
Developing countries Developed countries
1995 2025million metric tons
Source: Rosegrant et al. 2002. World Water and Food to 2025: Dealing with Scarcity
CEREAL DEMAND 1995 and 2025 BASELINE
IFPRI
Theme 5
101.6 96.4
220.5
115.5
0
50
100
150
200
250
Developing countries Developed countries
1995 2025million metric tons
Source: Rosegrant et al. 2002. World Water and Food to 2025: Dealing with Scarcity
MEAT DEMAND 1995 and 2025 BASELINE
IFPRI
Theme 5
AQUACULTURE % IN FISH PRODUCTION 1997 AND INCREASE 1997-2020
Capture32%
Aqua-culture
68%
Capture69%
Aqua-culture
31%
Fish production 1997 Increase in fish production,1997-2020
IFPRI
Theme 5
20
4060
80
100
120
Household Industrial Livestock Irrigation
perc
enta
ge c
hang
e
Developing Countries World
0
INCREASE IN WATER CONSUMPTION BETWEEN 1995 AND 2025
Source: Rosegrant et al. 2002. World Water and Food to 2025: Dealing with Scarcity
IFPRI
Theme 5
US4%
China29%
India18%
Rest Deved
16%
Rest Deving
33%
IRRIGATED CEREAL HARVESTED AREA, 1995 AND 2025
From 213 Mio in 1995 ha to 237 Mio ha by 2025
Source: Rosegrant et al. 2002. World Water and Food to 2025: Dealing with Scarcity
IFPRI
Theme 5
Rainfed Developed countries
20%
Rainfed Developing countries
30%
Irrigated Developing countries
39%
Irrigated Developed countries
11%
Rainfed Developed countries
20%
Rainfed Developing countries
30%
Irrigated Developing countries
39%
Irrigated Developed countries
11%
Source: Rosegrant et al. 2002. World Water and Food to 2025: Dealing with Scarcity
SHARE OF IRRIGATION AND RAINFED IN CEREAL PRODUCTION INCREASE, 1995-2025
IFPRI
Theme 5
Sources: FAOStat Agriculture 2004. Statistical database; Rosegrant et al. 2002. World Water and Food to 2025: Dealing with Scarcity
0.0
0.5
1.0
1.5
2.0
2.5
DevelopingCountries
DevelopedCountries
Worldperc
ent g
row
th ra
te p
er y
ear
1982-1992 1992-2002 2002-2025
ANNUAL CEREAL YIELD GROWTH RATES, 1982-92, 1992-2002, 2002-2025
IFPRI
Theme 5
2025 Sustainable Water Use
2025 Water Crisis
19952025
Business as Usual
-500
-400
-300
-200
-100
0
mill
ion
mt
Source: Rosegrant et al. 2002. World Water and Food to 2025: Dealing with Scarcity
LOSS OF GRAIN PRODUCTION DUE TO WATER SCARCITY, DEVELOPING COUNTRIES
IFPRI
Theme 5
-38
-20 -17-10 -7 -4
4
-83
-17
-42-35
-6
-21 -19
-90-80-70-60-50-40-30-20-10
010
1995 2025
WANA LAC China SSA SEA
S Asia (w/o India)
Indiamillion metric tons
Source: Rosegrant et al. 2002. World Water and Food to 2025: Dealing with Scarcity
REGIONAL CEREAL NET TRADE, 1995 and 2025 BASELINE
IFPRI
Theme 5
85
33
19 18
6 5
60
38
137 4 2
0
20
40
60
80
100
South Asia SSA South EastAsia
China WANA LatinAmerica
1997 2025million children
Source: Rosegrant et al. 2005. Looking Ahead: Long-Term Prospects for Africa’s Food and Nutrition Security
NUMBER OF MALNOURISHED CHILDRENBY REGION, 1997 and 2025 BASELINE
GLOBALIZATION –FOOD/WATER SECURITY
IFPRI
Theme 5
Goods and services – water & food Capital Labor Information Technology Disease-causing agents Weapons, terrorism, war Insecurity
GLOBALIZATION, INCREASING INTERNATIONAL FLOWS IN…
IFPRI
Theme 5
FOOD SECURITY & THE POOR
Food security:• National level - supply & trade• HH level – access to food [requires (farm) income]• Individual level – nutrition security, sufficient calories of
sufficient quality
Caloric availability has gone up 30% since 60s No. malnourished children from 46% to 31% in
developing countries (from 1970 to 97) Food prices ½ or less compared to 60s/70s
[bad for producers, good for consumer, majority] Globalization played a major role [technology
transfer/information/trade] – picture less clear for water security & the poor [ltd technology & inv]
IFPRI
Theme 5
Countries with worsening indicators 21 countries less calories and proteins
per capita than 1960s (26 less calories; 33 less proteins)
Number and incidence of malnourished children up in SSA by 17 million
Number of hungry people still high, mostly in SSA and South Asia
World not on path to achieving international targets to reduce hunger [MDG – given up on total eradication]
FOOD SECURITY & THE POOR
IFPRI
Theme 5
THE ROLE OF TRADE+ INDONESIA EXAMPLE
IFPRI
Theme 5
World agriculture [crops/livestock] trade: increase by a factor of 15 over 40 years [T&A: 30, Manufacturing: 55] from $32 billion in early 1960s to about $500 billion today
In fisheries, global supply shifts from developed to developing countries. Developing country exports rose 8%/yr 1976–2002, half of all fish exports now originate from these countries (~$60 billion)
Large FDI investments, f.ex. manufacturing industries relying on water supplies [impact water & food indirectly]; privatization of water supplies
TRADE SITUATION
IFPRI
Theme 5
112161
273
166
310
476
0
100
200
300
400
500
primary processed total
US$
bill
ion1981-1990 1991-2000
Developing country share in processed declined from 27% to 25% in these two periods
VALUE OF WORLD AGRICULTURAL EXPORTS (crops & livestock)
IFPRI
Theme 5
TRADE LIBERALIZATION INCLUDES
Reduction in trade barriers, including tariffs and quotas
Reduction in output price protection and input subsidies
Privatization of agricultural marketing and trade
Increased reliance on markets rather than planning and the public sector
… < 20% of food imported, but can help … but high subsidies in OECD countries
IFPRI
Theme 5
275
343 347
1986-1988 1999-2001 20010
50
100
150
200
250
300
350
400EUR Billions
EU
USA
Japan
Others
EUEU
USA USA
Japan Japan
Others Others
SUPPORT TO AGRICULTURE
Source: OECD (2002)
IFPRI
Theme 5Source: OECD (2002)
SwitzerlandNorway
KoreaJapan
EUOECD
USACzech Republic
HungarySlovak Republic
PolandAustralia
New Zealand
0 10 20 30 40 50 60 70 80Percent
1
1712
1110
4
213535
5964
6769
PRODUCER SUPPORT AS A SHARE OF TOTAL FARM RECEIPTS
IFPRI
Theme 5
ALTERNATIVE TRADE SCENARIOS
Trade Scenarios [DEDLIB, DINGLIB, FLIB] model a removal vs. increase of wedges (PSE and CSE) between domestic and international prices for agricultural commodities - Reductions are phased between 2005 and 2006 – results 2020
Net benefits to producers + net benefits to consumers + tax savings due to removal of subsidies under the Full Trade Liberalization Scenario, compared to the Baseline Scenario
IFPRI
Theme 5
PRICES INCREASE AS A RESULT OF REMOVING TRADE DISTORTIONS
18
9
24
6
13
20
14
7
13
32 31
16
11
19
0
5
10
15
20
25
30
35
Milk Sugarcane Rice Maize Beef
perc
ent c
hang
e in
202
0
DEDLIB DINGLIB FLIB
IFPRI
Theme 5
EXAMPLE INDONESIA – IMPACT ON CEREAL PRODUCTION & DEMAND
222 222 215 215232
211246 245 259 258
240265
0
50
100
150
200
250
300
BASE DEDLIB DINGLIB FLIB IIPR ILIB
kg/c
ap
2020 cereal prod/cap 2020 cereal dem/cap
IFPRI
Theme 5
EXAMPLE INDONESIA – IMPACT ON NET CEREAL IMPORTS
-2184
-6033 -6359
-11182 -11501
-14274-16000
-14000
-12000
-10000
-8000
-6000
-4000
-2000
0IIPR DEDLIB BASE FLIB DINGLIB ILIB
thou
sand
met
ric to
ns
IFPRI
Theme 5
EXAMPLE INDONESIA – IMPACT ON No. MALNOURISHED CHILDREN
5,565
5,213 5,1724,967 4,927
4,756
4,2004,4004,6004,8005,0005,2005,4005,6005,800
IIPR DEDLIB BASE FLIB DINGLIB ILIB
thou
sand
chi
ldre
n
IFPRI
Theme 5
Under FLIB, direction & magnitude of responds depends on degree of protection of farmers / taxation of consumers compared to other countries, and on the respective supply/demand elasticitiesIn the case of Indonesia, full worldwide trade liberalization does lead to a relative decline in local production and a relative increase in domestic demand, which shows that without liberalization, the country is protecting local farmers while hurting domestic consumers
INDONESIA – FULL LIBERALIZATION
IFPRI
Theme 5
Annual Economic Benefits 2025(billion US dollars)
West Asia/ North Africa 1.9Latin America 3.7Sub-Saharan Africa 3.3East Asia 3.0South Asia 2.0Southeast Asia 0.4Developing Countries 14.4Developed Countries 10.0World 24.4(2000 GDP China 1080 Billion US$, India 457 Billion US$, Ag Value added China 172 Billion US$, India 103 Billion US$[WDI 2002)
FULL LIBERALIZATION - BENEFITS
IFPRI
Theme 5
FULL LIBERALIZATION - BENEFITS
Current trade distortions displace $40 billion of developing country exports
If trade distortions were removed, estimates range from 40 [Anderson] -500 [Cline] million people [out of about 2500 million] being lifted out of poverty within 15 years or so
Poverty would increase in some countries, but decline in others [f.ex. Decline in poverty by 3.5% in Indonesia]
Trade alone is not sufficient to lift them out of poverty
Comparative advantage argument -
VIRTUAL WATER TRADE
IFPRI
Theme 5
Virtual water = the amount of water used in the production of agricultural commodities—and in other sectors
Food importing countries indirectly purchase water resources from exporting countries , thereby saving water they would have used
Global water savings occur when exporters are more water efficient than importers
Global irrigation water savings occur when exporters produce under rainfed conditions, while importers would have used irrigation otherwise
TRADE IN VIRTUAL WATER
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
IFPRI
VIRTUAL WATER FLOWS (1995)measured in crop ET, cereals
EU (15) excluding intra-trade Source: DeFraiture et al. 2002
IFPRI
Theme 5
VIRTUAL WATER FLOWS (2025)measured in crop ET, cereals
Source: DeFraiture et al. 2002
IFPRI
Theme 5
In 1995, 7% of total crop evaporation and 5% of irrigation water depletion was used to produce cereal crops for export
In 2025 this will rise to 8% and 5%, respectively Trade saves limited (irrigation) water: cereal
water use would only be 6% higher without virtual water trade & ca. 20% of cereal trade may be water related – thus water scarcity currently plays a modest role in trade pattern -expected to rise to 38% by 2025 for cereals
Instead other factors, like subsidies, and trade arrangements determine trade outcomes
TRADE IN VIRTUAL WATER
IFPRI
Theme 5
TRADE IN VIRTUAL WATER
Estimated Cereal ET total: - 2622 km3 (1995)- 2758 km3 (2025)
Savings due to trade: - 190 km3 (1995)- 355 km3 (2025)Savings due to water productivity (IE)improvement over the period 1995-2025:- 1215 km3
Water productivity improvements are more important than trade
Source: DeFraiture et al. 2002
MULTI-FIBER ARRANGEMENT
IFPRI
Theme 5
Established in 1974 to partially [~40%] protect the textile and apparel industries of developed countries from the low-cost competition of T&A (textiles and apparel [more]) from developing countries [originally Japan] in the form of quantitative restrictions
Trade shifted to Asian NICs quota system, production to India/China, Nepal/ Bangladesh /Mauritius [no concentration]
raised prices and depressed consumption depressed fiber crop production (implicit tax
of 20% vs. manmade fibers)
BACKGROUND ON MFA
IFPRI
Theme 5
OTHER IMPORTANT FACTORS
• High tariffs: 10-20% for textiles; 20-40% for clothing (2nd after agriculture)
• Other trade arrangements matter (NAFTA, EU-EE, Caribbean, etc.)
• NTB (labeling, customs regulations..)• High income elasticity (~0.9), growth in domestic
consumption developing countries• Few restrictions on cotton, share in fiber production
continues to decline• Post-9/11 security measures, f.ex. C-TPAT
(Customs-Trade Partnership Against Terrorism), integration: China, India, Pakistan & USA
• Labor, raw materials, supply reliability
IFPRI
Theme 5
SHIFTS IN TEXTILE AND APPAREL TRADE(in US$ billion)
-80 -60 -40 -20 0 20 40 60 80
USAEUHK
JapanO SasiaMexico
ThailandBangladesh
O SEAsiaPakistan
IndonesiaTurkey
S KoreaTaiwan
IndiaChina
199219972002
IFPRI
Theme 5
IMPORTS DEPEND ON ESTABLISHED RELATIONS AND PROXIMITY (in US$ billion)
0 5 10 15 20
LACChina
Asian NICsDeveloped
SE AsiaS Asia
Africa & ME
FSUEE
2001-021992-93
0 5 10 15 20
Africa & ME
EE
China
S Asia
SE Asia
Asian NICs
Developed
FSU
LAC2001-021992-93
EU USA
IFPRI
Theme 5
IMPACT OF PHASING OUT OF MFA ON … WATER AND FOOD
cotton
yarn
fabric
clothing
Cotton production- competition with other crops
Industrial water use / pollution- competition with other uses
T&A production Water availability
Industrial water use - competition with other uses
Cha
nge
in L
ocat
ion
CI
LI
IFPRI
Theme 5
Significant cotton producer (1) the YRB, incl. Henan & Shandong (vs. soybean/corn); (2) the Yangtze, incl. Jiangsu and Anhui (vs. rice); and (3) the Northwest (Xinjiang) (vs. corn);
With MFA phase-out: Global value of T&A 2.5% higher in 25 years; China: textile +9%, apparel +16%
Global cotton production +3.5%, China +9%, MENA +6%, US -1%
Cotton price +2%,
Source: MacDonald, Somwaru, Meyer, and Diao 2001.
END OF MFA - ROLE OF CHINA
IFPRI
Theme 5
Greater concentration and vertical integration – cotton China, India & Pakistan – small impacts on food/water;
Largest impact through direct incomes in T&A industries, thus indirectly on food and water through lack of purchasing power
THUS, END OF MFA
IFPRI
Theme 5
CONCLUSIONS
IFPRI
Theme 5
CONCLUSIONS Forces outside of the water sector are
changing water management rapidly today and into the future – they include globalization, trade, and climate change
High subsidies to agriculture (& subsidies to water infrastructure) bring inefficiencies into trade, food production, and water use, thus lead to wastage, and contribute to water scarcity, poverty, and food insecurity
‘Unproductive’ subsidies should be invested in ‘productive’ investments, such as infrastructure and technologies, R&D
IFPRI
Theme 5
CONCLUSIONS
Water endowments currently have a limited explanatory power for food and other (indirect) water trade
Overall, trade, if not distorted, and globalization will help the poor increasing food and water availabilities
Need for complementary investment and social policies for poverty alleviation and food security
IFPRI
Theme 5
INVESTMENTS NEEDED IN
Additional water investment in developing countries, public supply / wastewater, & irrigation [including large dams]
Establish well-defined water rights, flexible enough to allow trading
Design water pricing mechanisms to pay irrigators to use less water
Eliminate power subsidies to groundwater pumping
Invest in crop breeding for drought, heat, and saline tolerance
Invest in research on water management, including low tillage, rainwater harvesting