Trade and Globalization Policies

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The impact of globalization on food systems is of a very complex nature. The cases prepared for this section address the impact of trade and agricultural policies in both high- and low-income countries as well as the impact of other elements of globalization such as the international expansion and concentration of the private food sector. These cases discuss the impact of trade and domestic agricultural policies in OECD countries on low-income countries and low-income people, available policy options for alleviating these negative consequences, and the effect of tariff escalation and non-tariff trade barriers.

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    Sustainable Development of Agro-Industrial Sector and Food Security of the Kyrgyz Republic in the Process of Integration into the Eurasian Economic Union
    Yakubovich, Ekaterina; Yenikeyeva, Zalina (CUL Initiatives in Publishing (CIP), 2016)
    The integration of the Kyrgyz Republic into the Eurasian Economic Union (EAEU) will permit the country to most optimally combine the diversity of natural, economic, intellectual, and other resources into a single system. However, within the framework of the EAEU, the food security of the country depends mostly on ensuring the conditions for effective functioning of the agro-industrial complex, effective implementation of its potential to optimize the volume of production of competitive agricultural products and food necessary to meet the needs of the population and processing industry, and reduction of dependence on food imports. This study aims to identify the key food security issues of the Kyrgyz Republic in the process of its integration into the EAEU. To this end, the study identifies key changes in the agro-industrial complex and reveals the interests of potential stakeholders (the political elite, business, actors in the agricultural production sector, population, etc.) in strengthening food security. To improve food security of the Kyrgyz Republic in the process of its integration into the EAEU incorporating the best interests of all stakeholders, the following policy options were offered: (i) to create a system of procurement depot complexes; (ii) to expand the transportation systems and replace the vehicle fleet; (iii) to reform veterinary and phytosanitary systems; (iv) to support the food security atlas; (v) to actively participate in the Scaling Up Nutrition (SUN) Movement; and (vi) to strengthen the social protection system to reduce poverty in rural areas. The food security situation in the country was forecasted based on current trends and factors as well as proposed recommendations, which were prepared during this case study. In making decisions, the Government of the Kyrgyz Republic must take into account the interests of all stakeholders in an optimal manner and, at the same time, must understand that integration into the EAEU does not deprive political elites of their independence in making management decisions. All proposed policy options will help develop the agro-industrial complex of the country and strengthen its food security; however, it is expected that the most productive options include creating a system of procurement depot complexes; reforming the veterinary and phytosanitary systems; developing the transportation system; and strengthening the social protection system to reduce property in rural areas. Implementation of these policy options will help agricultural producers of the country enter the common agricultural market as well as help the government improve quality of the agricultural output, reduce dependence on imports, increase exports, reduce social tensions, and supply quality food products to the population of the country.
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    Miami Rice in Haiti: Virtue or Vice?
    Phillips, Erica; Watson, II, Derrill D. (CUL Initiatives in Publishing (CIP), 2011)
    Critics of free trade often use Haiti as a poster child for failed trade liberalization policies. In 2010, 15 years after the second round of trade liberalization in Haiti, U.S. President Bill Clinton, who was instrumental in Haiti's trade negotiations, apologized for convincing Haiti to adopt liberalization policies. He said, It may have been good for some of my farmers in Arkansas, but it has not worked. It was a mistake, I had to live every day with the consequences of the loss of capacity to produce a rice crop in Haiti to feed those people because of what I did; nobody else (Katz 2010). Food insecurity has been a challenge in Haiti for more than 30 years. In 1986/87, almost 50 percent of households in a nationwide survey had less than 75 percent of the recommended levels of food energy intake (Jensen, Johnson, and Stampley 1990b), and in 2000 the Food and Agriculture Organization of the United Nations (FAO) concluded that Haiti had the third-highest caloric deficit per person in the world, behind Somalia and Afghanistan. The most severe poverty and food insecurity were and continue to be in Haiti's rural areas (Jensen, Johnson, and Stampley 1990b; Institut Haïtien de l'Enfance and Macro International 2007). Most analysts of Haitian food security agree that Haitian agriculture is constrained by low government and donor investment, a limited amount of arable land in a mountainous country, small landholdings due to inheritance divisions made with each generation, environmental deterioration, and poor infrastructure. Total agricultural output has stagnated or declined since the 1960s (FAO 2010). Free-trade critics additionally argue that Haiti's food security problems in the 21st century are caused or exacerbated by the structural adjustment policies promoted by the World Bank and the International Monetary Fund. These policies led Haiti to reduce rice tariffs from 50 to 3 percent, a shift that allowed large amounts of subsidized rice grown in the United States to enter the Haitian market, displacing Haitian-grown rice and destroying the livelihoods of rice farmers (McGuigan 2006; IMF 2001). This case explores the impact of Haiti's liberalized rice trade on food security in Haiti, identifies the policy's winners and losers, and considers the historical and political context that contributed to these outcomes. Key stakeholders include Haitian rice sector workers, urban and rural consumers, the Haitian government, U.S. rice growers, and international institutions, including the International Monetary Fund and the World Trade Organization (WTO). The government's policy options for reducing poverty and improving food security include reinstalling protections for rice farmers to boost domestic prices, investing in agriculture or agricultural markets to increase crop yields and possibly exports, developing alternatives for urban and rural employment, and challenging cheap rice imports from the United States through the WTO. It is 2006 and President-elect René Préval is about to start his second term as president. In the context of the rice situation, you are asked to address him on how to reduce poverty and hunger throughout the country. The country successfully pursued improved macroeconomic stability during 2004-2006 and is now in a better position to focus on reducing poverty and hunger as it prepares its Poverty Reduction Strategy Paper. Given the available statistics and their uncertainties, what would you advise him to do to reduce rural and urban poverty and hunger? How would your answer change in response to the food price crisis in 2007-2008?
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    Vietnam's Aquaculture Trade: Food Safety and Sanitation Issues
    Thanh, Le Ha; Chuong, Pham Hong (CUL Initiatives in Publishing (CIP), 2010)
    Vietnam's rapidly increasing seafood exports have made a significant contribution to the country's economic development over the past few years, largely as a result of vastly increased production from aquaculture. Currently, processed aquatic products are one of Vietnam's four major export items in value terms. Success, however, breeds new challenges. Experts note that in recent years food safety standards have become a more prominent issue for global trade in agricultural, aquatic, and food products. Like other livestock production, aquaculture uses antibiotics, vaccines, and other production practices that may have food safety implications that can trigger trade restrictions. Most Vietnamese seafood export enterprises are having difficulties understanding the food hygiene and environmental requirements in the individual importing markets as well as in consumer chains. Given the lack of a comprehensive model for managing antibiotics and other chemicals, trade actions against the Vietnamese seafood export sector have been relatively frequent. The sector now faces strict food safety, sanitary, and environmental standards required by developed countries, especially the European Union, Japan, and the United States. Market access for Vietnamese seafood exports has been affected by the rigorous and ever-changing standards. Compliance with these standards has placed a heavy burden on Vietnamese exporters, which are mainly small and medium-sized enterprises. The cost of compliance has also reduced the competitiveness of Vietnam's seafood industry. To overcome this challenge and in response to stricter market access requirements, the government and private sector in Vietnam have undertaken a number of actions to secure the entry of its exports in overseas markets. Nonetheless, many problems remain in Vietnam's food safety regulatory system. They include the lack of a comprehensive model for managing antibiotics and chemical and biological products; low awareness of the food sanitation issues of different stakeholders; and lack of institutional, technical, and financial resources to ensure the sanitation standards. Both the government and the private sector in Vietnam must act faster and more skillfully to strengthen their capacity. Vietnam will also benefit from meeting these requirements because they will help strengthen state management capacity and competitiveness, improve health, and promote more sustainable use of natural resources. Your assignment is to recommend to the Vietnamese government policies how to deal with the combined food safety and trade issues related to the expansion of aquaculture production for export and domestic consumption.
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    Tariff Escalation in World Agricultural Trade
    Cheng, Fuzhi (CUL Initiatives in Publishing (CIP), 2007)
    Tariff escalation, a common practice in international commodity trade, refers to a situation where tariffs are zero or low on primary products and increase, or escalate, as products undergo processing. It causes the price of value-added imports relative to raw products to increase, decreasing the demand for processed products in the importing country. Through tariff escalation, one country can effectively protect its domestic processing industries while limiting the scope of trade-related industrialization in foreign countries. Tariff escalation significantly impedes market access for developing countries, particularly in agricultural trade. Higher tariffs for moreprocessed agricultural products have the potential to depress value-added activities and obstruct export diversification in agricultural exporting countries. In addition, tariff escalation is perceived as a source of environmental damage to exporting countries because excessive reliance on primary product exports can lead to depletion of natural resources and disturb the ecological balance. Although the importance that developing countries attach to reducing tariff escalation is widely recognized, little progress has been made in this area. The structure of escalated tariffs in world trade is caused and maintained by the rentseeking behavior of economic agents and the resulting political economy of trade policies in developed countries. Food-processing industries in developed countries are proponents and beneficiaries of escalated tariffs. As agricultural commodity chains, particularly those of high-value crops and processed products, become increasingly dominated by a few giant multinational enterprises, industry's incentives and ability to maintain tariff escalation grow stronger. Developing countries and consumers in developed countries are the losers from tariff escalation, but they lack the political power to change the existing regime. Reducing tariff escalation is an important issue in the ongoing World Trade Organization (WTO) negotiations on agriculture. Recognizing that tariff escalation is widespread in the post– Uruguay Round period, many negotiating proposals have called for eliminating or reducing tariff escalation as an explicit goal within the market access pillar of the Doha Round negotiations. Studies have also shown that these proposals offer options conducive to further reduction in tariff escalation. A few technical problems may arise, however, and special consideration must be given to the least-developed countries (LDCs) to prevent erosion of their preferential margins. The formation of a coalition of interests between the South and the North could make an agreement to further reduce tariff escalation more politically feasible. Furthermore, strategies aimed at reducing tariff escalation should be accompanied by other domestic and trade policies designed to enhance the internal capacity of developing countries. Sometimes these policies will involve financial and technical assistance from developed countries. Your assignment is to recommend to the WTO a change in trade policy measures that would allow tariff escalation to be reduced and eventually eliminated.
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    Meeting Sanitary and Phytosanitary (SPS) Standards: What Can China Do?
    Cheng, Fuzhi (CUL Initiatives in Publishing (CIP), 2007)
    It is widely recognized that rising sanitary and phytosanitary (SPS) standards have created numerous obstacles to the international exchange of agricultural commodities. The issue is of particular importance for developing countries with abundant agricultural resources as they seek to expand their exports of labor-intensive, high-value-added agricultural products to the more lucrative developedcountry markets. Agricultural exporters in developing countries are often required to meet stringent developed-country SPS standards. Not only are these standards much higher than international standards and those prevailing in developing countries, but they are also subject to frequent (usually upward) revisions. China is a large agricultural producer and exporter. As China's agricultural trade continues to increase, the country has experienced more challenges in meeting the SPS standards set by its trade partners. While some of the SPS standards are legitimate and necessary for protecting human, animal, and plant health, others are considered to be disguised forms of protection. Concern in China has grown that technical regulations such as the SPS standards are increasingly being used to discriminate against some of its exports. The European Union (EU), Japan, and the United States are the three markets in which China has encountered the most SPS barriers. Because of the difficulty of challenging foreign SPS barriers, it is considered more practical to meet these high foreign standards. To this end, China has enacted many laws and regulations on food and agricultural production. Despite efforts, many problems exist in China's food safety regulatory system. First, domestic food regulations are usually not consistent with or are less restrictive than international standards. Second, there is little coordination among the various government ministries and agencies when they establish agricultural standards and food safety controls. Third, the lack of technical, institutional, and managerial capacity to control and ensure compliance makes the regulations and standards ineffective. Capacity building in both the public and the private sector will help China move toward better food safety status and create more trade opportunities. The private sector, including the farm sector, has the main responsibility for producing and selling safe food. Attracting more foreign direct investment (FDI) and establishing Hazard Analysis and Critical Control Point (HACCP) systems and coordinated supply chain management in agriculture should be the main focus. The government, however, sets the framework within which the private sector operates, and the role of the public sector in organizing public services and promoting food safety should be emphasized. Your assignment is to develop strategies that China can use to enhance its capacity to meet food export quality standards, taking into account the financial, institutional, and technical constraints it is facing.
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    Preference Erosion, the Doha Round, and African LDCs
    Yu, Wusheng (CUL Initiatives in Publishing (CIP), 2007)
    African least-developed countries (ALDCs) have enjoyed preferential treatment in exporting their agricultural products to developed countries. Reductions of agricultural trade barriers on a mostfavored nation (MFN) basis by preference-granting developed countries may erode the benefits of these preferences. In particular, MFN tariff reductions coordinated through a World Trade Organization (WTO) agreement could cause serious preference erosions, and the current Doha Round of trade negotiations, aimed at ambitiously reducing agricultural trade barriers, may conclude with such an agreement. The Doha Round has also declared a “development agenda,” which emphasizes the interests of developing countries, including the LDCs. The so-called special and differential treatment of developing countries—of which trade preferences make up an important instrument—is designed to help realize the development agenda and counter any unwanted consequences from multilateral liberalization. Some WTO members have discussed extending trade preferences as a way to safeguard the interests of the LDCs, but the desirability and feasibility of this proposal have been debated with diverging views. This case discusses a range of policy issues relating to preference erosion and WTO multilateral trade liberalization, including the role of preferences in promoting exports from the ALDCs, the extent and scope of likely preference erosion, and the possibility of extending preferences. It analyzes the positions and interests of several key stakeholders, especially the ALDCs, and presents policy options for tackling these issues. Specifically, the so-called July Package proposal for extending preferences has been interpreted as “deepening, widening, broadening, and strengthening” preferential treatment for ALDCs. An analysis of the quantitative estimates of the impact of these actions shows that preference erosion is indeed a concern for the ALDCs and that adopting the July Package will help the ALDCs cope with the erosion. Furthermore, costs to the preference-granting countries of adopting these measures are estimated to be modest, and trade diversion does not appear to be a serious concern for third countries. Responding to concerns about preference erosion, a number of authors argue that enhancing preferences is not the right answer to the problem. They insist that the multilateralism championed by the WTO will eventually help the poorest countries and that transitory issues such as preference erosion can be handled by complementary nontrade policy measures, including effective development aid and investment in domestic infrastructure. Your assignment is to propose a policy package that would tackle the preference erosion problem facing ALDCs, for discussion by the WTO. The package may include policies to strengthen preferences and/or complementary measures.
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    The Coffee Crisis: Is Fair Trade the Solution?
    Cheng, Fuzhi (CUL Initiatives in Publishing (CIP), 2007)
    Coffee is an important crop widely grown in the developing world. The economies of some countries, particularly those in Central America and parts of Africa, are highly dependent on coffee as a source of both national income and export earnings. About 25 million people, most of whom are small-scale farmers, rely on coffee for a living. Smallholder coffee farmers once reaped abundant benefits from their crop. Cash from coffee sales financed schools, hospitals, infrastructure, and training for farmers. Coffee-producing regions were also associated with higher income levels, higher literacy rates, higher nutritional levels, and less political instability. But all these benefits have evaporated since the late 1990s, when the world coffee price slumped to unprecedented low levels. The collapse of coffee prices has led to a humanitarian crisis with devastating effects on coffee growers, communities, and countries. In the absence of government intervention in the sector, a number of innovative approaches, most notably the Fair Trade movement, have been proposed to revive farmers' incomes from coffee production. The Fair Trade movement seeks to challenge historically unequal international market relations, transforming North–South trade into an avenue of producer empowerment and poverty alleviation. Recently the Fair Trade movement has been characterized by national labeling initiatives coordinated under the Fairtrade Labelling Organizations International (FLO). The FLO certification is designed to help coffee growers gain direct access to international markets at guaranteed premium prices. Fair Trade has had some success, but it also raises a number of issues. First, there is substantial concern about how much growers can actually benefit from this scheme. Although studies have shown that a decent share of Fair Trade premiums do reach growers, a large portion still goes to companies' profits or to administrative costs of Fair Trade organizations. Second, it is questionable whether Fair Trade can be a long-term solution to the coffee crisis. The cause of the coffee crisis is oversupply, so the high prices Fair Trade offers induce farmers who would otherwise seek other alternatives to stay in coffee production, exacerbating the current situation. Third, the Fair Trade practice itself may be an inefficient means of wealth reallocation, making it susceptible to criticism from economic grounds. Recognizing that the current coffee market problems are complex, policy makers have twin objectives: to meet the short-term needs of poor farmers during the crisis and to find longer-term solutions to overproduction in the market. Obviously, the most effective long-term strategy to assist the majority of coffee growers is not to create a niche market, but to help them explore other potential sources of income and dismantle barriers to switching crops. Before such a longterm strategy can take effect, however, Fair Trade should continue to be pursued. Your assignment is to design an international coffee agreement to solve the problems now facing the farmers. By accounting for the different parties involved—coffee-producing countries, coffeeconsuming countries, and nongovernmental organizations (NGOs)—you are required to identify both challenges and opportunities in the negotiation process.
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    The Textile and Clothing Agreements
    Shemin, Jill S. (CUL Initiatives in Publishing (CIP), 2007)
    Demand for textiles and clothing (T&C) has been rising quickly in the developed world (the European Union and United States), and it is forecast to grow further in the future. At the same time, especially during the past decade or so, low-income developing countries have greatly increased their T&C production, allowing them to develop their T&C industry and utilize their vast resources of low-skilled labor. For 30 years the world's richest countries have imposed stringent quotas on imports of T&C. From 1974 to 1995, the Multi-Fiber Arrangement (MFA) defined the regulations for tariffs and quotas1 on all T&C trade categories. The Uruguay Round (UR) Agreement on Textiles and Clothing (ATC) stipulated that import quotas be eliminated in a four-stage process between 1995 and 2005. Over that period T&C quotas were gradually reduced, and on January 1, 2005, all T&C categories were brought under the regular World Trade Organization (WTO) rules that apply to other manufactured goods. It was certain that after the lifting of T&C quotas there would be winners and losers. Although Canada, the European Union (EU), and the United States have implemented safeguard measures2 as permitted by the general WTO agreement, imports were projected to rise and prices to fall. The T&C producers in these countries would face serious competition and their market shares would shrink. It was also likely that China would capture a large share of the market, leaving smaller developing countries with very little of the market. Aside from these concerns, quotas present many other policy issues in bilateral and multilateral trade. Quotas undermine the competitive advantage of developing countries and restrict them to producing at lower levels than they would have under free trade. Quotas also impose additional costs and distortions owing to the monitoring needed to keep track of country of origin, as well as the rent seeking and rerouting that occur in an attempt to bypass the provisions. Your assignment is to prepare recommendations for a new international agreement for trade in textiles and clothing that would be acceptable to Bangladesh, China, the EU, Honduras, and the United States. Discuss the policy issues with regard to support for and resistance to eliminating the quotas. Justify your recommendations, and assess the consequences for stakeholder groups.
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    Trade Liberalization in South Korea's Rice Sector: Some Policy Implications
    Hong, Sukjong; Cheng, Fuzhi (CUL Initiatives in Publishing (CIP), 2007)
    The tension between the liberalizing agenda of the World Trade Organzation (WTO) and the policies of industrial-country members of the WTO has been framed as a battle between developed countries and less-developed countries. In this contentious arena, one of the charges persistently brought against South Korea is that its domestic support policies distort the distribution of potential trade benefits that would be generated by access to its domestic rice market. This market is considerable, as South Korea, along with Japan, is one of the world's biggest consumers of japonica or shortgrain rice. The issue of domestic support for rice has been central to the dialogue on South Korea's trade policy since the 1994 Uruguay Round of the WTO, when South Korea committed to liberalizing a large share of its agricultural and fisheries markets by 1997 and its staple foods market, including rice, by 2004. Within a decade national imports of rice increased from 51,000 tons to 205,000 tons, and in 2006 Korea signed an agreement with the Association of Southeast Asian Nations (ASEAN) to double imports over the next 10 years without compensating for farmers' income losses. But trade advocates still criticize these steps as a deferral of full liberalization. At the same time, Korean farmers and civil society groups have charged that these measures reduce the nation's primary staple grain to a tradable commodity and threaten the livelihoods of Korea's historically significant base of farmers. Public demonstrations to block the passage of parliamentary votes on free trade agreements have become frequent occurrences in the national arena, and Korean farmers have linked up with the global food sovereignty movement in visible solidarity actions at the site of WTO ministerial meetings. Trade in rice is clearly a politically charged debate in South Korea, intersecting discussions of national food sovereignty, rural development, and cultural and social identity. The country's high dependence on manufacturing exports and its high protection in the rice sector present a major dilemma within the government's trade agenda. This situation is further complicated by Korea's sidestepping of the multilateral bargaining table in pursuit of bilateral free trade agreements (FTAs) and regional agreements within the Asia-Pacific Economic Cooperation (APEC) forum and with ASEAN members. As of 2006, Korea had pursued FTAs with Canada, China, the European Union, Japan, Mexico, Singapore, and the United States. But agricultural trade issues still figure prominently in pending discussions with China, ASEAN, and the United States, all of which also export rice. Evidently, the primary benefit to Korea in these agreements is increased market access for its manufacturing and industrial sector. Your assignment is to suggest a long-term plan for the South Korean government that will address the international trade issues as well as the nation's food needs and the future viability of the farming sector. With food aid to the Democratic People's Republic of Korea still a pressing humanitarian need, propose an economic and political agenda for engaging in partnership with this country. What would a sustainable solution to these various trade and aid issues look like?
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    The Impact of U.S. Subsidies on West African Cotton Production
    Woodward, Andrea R. (CUL Initiatives in Publishing (CIP), 2007)
    Cotton subsidies and their impact on international prices and on the livelihoods of poor African cotton farmers have become a central focus of the Doha Development Round of World Trade Organization (WTO) negotiations. Cotton subsidies have taken a high profile in part because cotton is a critical crop for some of the world's poorest countries, including the “Cotton 4” countries of Benin, Burkina Faso, Chad, and Mali. Another reason for this attention is that middle-income countries such as Brazil and China have a great deal at stake in cotton trade and much to gain through the elimination and reform of U.S. cotton subsidies. Because of the prominent role cotton plays in the economies of “Cotton 4” countries, a small decline in cotton prices can make an enormous difference in the ability of their farmers to pay for health care, education, and food. A good price for cotton allows farmers to boost production of subsistence crops, slows urbanization by keeping people in rural areas, and creates localized wealth in rural places that need it most. Opponents of the U.S. cotton subsidy program argue that it is trade distorting, because it results in at least a 10 percent reduction in global cotton prices. They also assert that it is a burden on U.S. taxpayers to keep afloat an inefficient industry that would not be profitable without subsidies. Advocates of the program argue that larger factors are at play in the world cotton price and that the impact of U.S. subsidies is negligible. Cotton producers in the United States, West Africa, and middle-income cotton countries have a great deal at stake in the debate over subsidies. The WTO is also a major stakeholder, because some observers see cotton as a litmus test of whether or not the WTO is capable of serving the interests of less powerful countries and poor people. Important questions for all parties include who the real winners will be if subsidies are reformed or eliminated, what the alternatives are for cotton producers who cannot compete in the global market, and what kind of leverage the world's poorest producers might have in future trade negotiations. Your assignment is to prepare cotton subsidy recommendations for the next U.S. farm bill that would be acceptable to all stakeholder groups. Discuss policy issues regarding support for and resistance to the recommendations, justify these recommendations, and assess the consequences for stakeholder groups.