Transcript The role of subsidies in agricultural trade reform

Global Food Security: What Roles
for Technology and Trade Policies?
Kym Anderson
Universities of Adelaide and Australian National University
[email protected]
ICABR Conference on Political Economy of the Bio-economy,
Ravello, Italy, 24-27 June 2012
Food security/technology/
trade policies nexus
Food security is about all people always
having access to enough nutritious food
for a healthy life
New agric technologies can raise the
quantity and quality of available foods
But trade can enable those without
sufficient endowments or technologies to
nonetheless be food secure
Hong Kong, Monaco, Singapore aren’t food insecure
Food security/technology/
trade policies nexus (continued)
What affects food security is spending
capacity to buy food, and its price
Hence things that reduce global poverty
or reduce int’l price of food are likely to
boost global food security
Example: public investment in ag R&D that
leads to adoption of better agric technologies
Food security/technology/
trade policies nexus (continued)
However, a nation’s trade policies can de-link its
domestic price from int’l price, and can reduce
national econ welfare and its growth
Biofuel subsidies & mandates raise demand for
and hence int’l price of food
Impact on national or global food security
depends on effect on not only spending but also
on earnings of households
including unskilled non-farm laborers whose wage
might be affected by, eg, a change in farmgate prices
Underscores value of using an empirical,
economy-wide, global model, because:
Theory can’t even reveal sign of some effects,
let alone magnitude
Indirect effects of a shock within an economy
may be more important than –and may even
offset – the direct effects
Int’l spillovers can cause food security
benefits in one country group to be more or
less offset by FS losses in ROW
Focus of present paper
20th century saw real food price trend declining
21st century (so far) has seen it rising
Most projections suggest high int’l food prices for
next decade or more (eg IFPRI, OECD/FAO)
due to rapid growth in natural-resource-poor
emerging economies, & thus adding to climate
change and energy security concerns
Focus of present paper (cont.)
What roles can technology & trade policies
play in long run to improve global food
security?
... leaving aside issues affecting short-run
price fluctuations, even though they too can
affect food security in important ways
Roadmap
Technology policies in 20th century
Agric price and trade policies to 2010
Draws on World Bank agric distortions project
Baseline global projections to 2030
Builds on our contrib’n to ADB’s 2011 flagship
Impacts of altering baseline assumptions:
TFP growth (via technology policies and CC)
Agric price and trade (and CC) policies
How best to deal with poverty & national food
security consequences of market forces?
Technology policies in 20th century
Unprecedented public investment in agric R&D
(Alston, Pardey et al.)
Mainly in high-income countries
Plus CG’s IARCs from 1960s, boosting NARS and
generating Green Revolution in Asia esp.
But with int’l food prices at record-low level in
mid-1980s, Malthus was considered beaten and
public and int’l ag R&D investment slowed
True, private agric R&D grew from 1990s,
because of biotech profit opportunities
But adoption confined to few crops in <30 countries
because of anti-GMO attitudes and regulatory policies
Agric price and trade policies to 2010
Agric policies of developing countries lowered
their domestic food prices but raised int’l price
Agric policies of high-income countries raised
their domestic food prices, lowered int’l price
Net effect on mean int’l price by 1980s close
to zero (Tyers and Anderson 1992), but
policies possibly worsened food security:
in DCs (where many poor were food sellers) and
in HICs (where most poor are net food buyers)
Then major reforms in both country groups
from mid-1980s
Reform of Asia’s price-distorting
policies supplemented Green Rev.
New agric technologies, esp. Green
Revolution in Asia, often given credit for
maintaining agric self-sufficiency in Asia
... especially in 1960s and 1970s
But also important from 1980s were
agric price, trade & exchange rate
policy reforms
E. Asian agric self-sufficiency, %
1960s
1970s
1980s
China
100
100
100
100
98
India
98
99
99
100
100
Indonesia
na
105
105
103
102
113
112
103
100
99
na
120
133
131
137
Philippines
Thailand
1990s 2000-04
Rates of agric & nonag assistance (%)
INDIA
CHINA
Relative rate of assistance (%), HIC & DC
Key policy modeling questions:
What counterfactual trade policy regime
to assume in projecting forward?
Status quo? Or will DCs follow HICs in
providing agric protectionism growth as their
incomes grow?
What agric TFP growth rates to expect?
Depends largely on govt’s public agric R&D
investment policies
East Asia’s RRAs, 1955-2010
Relative Rate of Assistance, %
250
200
Korea
150
Japan
100
50
Taiwan
0
7
India
8
9
ASEAN
-50
China
-100
10
ln GDP per capita
11
Projecting markets to 2030, using a
global economy-wide model (GTAP)
Need to make assumptions also about:
Growth in endowments
Preference changes as incomes grow
Pop’n and per capita income growth rates
Then TFP growth can be calculated
endogenously
and we assume for baseline, as in past
(Martin and Mitra, EDCC, 2001), that TFP
grows faster in primary than other sectors
Model details (joint with Anna Strutt)
We use a modified version of GTAP’s
global comparative static model to
project world economy in 2007 to 2030
Aggregated to 35 regions and 26 sectors
Core sim. calibrated to project 10% rise in
prices of primary relative to other products
Summary of GDP & endowment
growth rates, 2007-2030 (% p.a.)
GDP growth
Population
Unskilled labor
Skilled labor
Capital
Agric. land
Oil
Gas
Coal
Other minerals
Highincome
Developing
of which
Asia
Total
1.6
0.3
-0.6
1.4
1.2
-0.3
2.1
0.3
-0.3
2.1
5.1
1.0
0.4
3.2
5.7
-0.1
1.5
2.5
6.0
2.1
6.2
0.8
0.1
3.0
5.4
-0.2
0.9
1.1
6.3
2.1
2.5
0.9
-0.4
1.8
2.3
-0.2
1.7
1.4
2.9
2.1
19
Core 2030 baseline scenario:
Projected shares of HICs and DCs
World GDP
share (%)
2007 2030
World
population
share (%)
2007 2030
Relative
GDP per cap
(% of world)
2007 2030
High-income
74 54
20
17
376 320
Developing
26 46
80
83
33 56
of which Asia:
15 32
54
53
27 60
100 100
100 100
World
100 100
Structural changes: HIC & DC
shares of global exports, by sector(%)
Primary
goods (%)
2007 2030
Manuf.
Goods (%)
2007 2030
Services (%)
2007 2030
High-income
7
9
43 25
13
8
Developing
9 12
23 38
5
8
1.9 2.5
17 32
3
5
16 21
66 63
of which Asia:
World
18 16
Implications for agric imports by Dev. Asia
Dev. Asia’s share of global ag and food
imports rises from 14% in 2007 to 42%
in 2030
mainly due to China (goes from 4% to 28%)
Dev. Asia’s agric self-sufficiency falls from
96% to 89%
=> Unlikely to be tolerated politically?
Implications for agric SS ratio
Developing Asia’s agric selfsufficiency falls from 96% to 89%
despite higher TFP growth in agric
than manuf and services
=> Unlikely to be tolerated politically?
Alternative 2030 TFP growth scenarios
Two alternative TFP scenarios considered:
1. Slower global primary sector TFP growth
causes primary product prices to rise 17%
instead of 10%
2. Faster grain TFP growth in China and India
does little to aggregate int’l price of agric goods,
but it causes int’l grain prices to rise by 5-7
percentage points less than in core baseline
Cumulative changes in international prices of
grain to 2030 (%): 3 different baselines
2030
core
2030 slower
prim TFP
2030 faster
Ch/In
grain TFP
Rice
13
18
6
Wheat
12
25
7
Maize
15
32
10
All agric
10
17
9
Food self-sufficiency higher, and greater food
cons’n, from faster grain TFP in Ch & In
Rice and wheat self sufficiency in Ch &
India 4-7% higher in 2030 if grain TFP
growth is 1 percentage point higher p.a.
Household consumption of all agric
products in China & India would be 2
percentage points higher in 2030 than
otherwise
More food security for them; less for ROW?
Alternative scenarios in our related papers
Impacts of trade policy changes:
Regional or multilateral reform, versus
agric protection growth in DCs?
Changes to restrictions on trade in
products that may contain GMOs?
(presented at an earlier ICABR conference)
Impacts of climate change, & of policy
responses to it, such as carbon tax?
Trade reforms
Free-trade area in Asia (ASEAN+6) would
alter national ag & food self sufficiency
by only 1-2 percentage points
As would global free trade, except for China
where it would drop 4 percentage points
But it would boost household cons’n of
agric products by 2 to 4 percent
Trade reforms (continued)
However, if the counterfactual trade
policy was not status quo but rather
agric protection growth in DCs,
freeing trade would cause household
cons’n of agric products in Developing
Asia to be 3% higher than in core
scenario for 2030
Climate change
Need first to convert projected biophysical effects
of CC into economic shocks (e.g., into future
impacts on factor productivity)
land productivity is expected by CC scientists to:
• rise in high latitudes, fall in tropics (hence mixed for
Australia), with a slight net reduction globally
[Again, let’s leave aside volatility issues, and Alan
Olmstead’s point that ag. scientists will innovate
and farmers will adopt and adapt]
A fall in global crop and pasture land productivity
would raise farm output prices globally
Hence gross farm incomes may rise, even in
regions/sectors with falling land productivity
Projected effects on land productivity of
CC by 2030 (%) (Hertel, Burke and Lobell, 2010)
Wt
Australia
United States
W. Europe
Japan
China
Other DCs
Wheat
Coarse
grains
Rice
Oilseeds
7
2
7
4
2
-3
-5
3
-5
0
-10
-10
-3
-3
7
9
0
-3
2
2
7
9
0
-3
Direct effects of CC on agric, 2030
(% deviation from baseline due to land productivity change)
Farmer Prod’n Value Value of
price volume added exports
Value of
imports
Australia
0.5
0.7
-1.7
2.2
1.0
USA
0.3
0.4
-1.2
2.5
-0.6
-0.3
1.1
-0.5
3.3
-0.7
Brazil
0.5
-0.7
0.0
-1.7
0.6
China
4.3
-1.8
-4.4
-21.1
6.2
India
3.2
-1.7
-2.0
-6.7
12.7
SSAfrica-RSA
2.5
-1.7
-1.3
-6.6
2.6
WORLD
1.2
-0.2
-1.6
0.9
1.5
W. Europe
Direct agricultural effects (continued)
Two other factors affect overall national
economic welfare of direct agric effects:
Terms of trade change: temperate agricexporting countries are likely to be better off,
and food-importing countries to be worse off,
other things equal
But presence of price-distorting policies can
cause adverse second-best welfare effects
from international re-location of farm
production (e.g., in Japan)
Effects on annual econ welfare of crop
productivity changes, by 2030 (2004 US$ bill.)
Decomposition of welfare effects, due to change in:
Product- Terms of
ivity
trade
Efficiency
TOTAL
Australia
USA
0.0
0.0
0.3
0.9
-0.0
-0.3
0.3
0.7
W. Europe
0.8
0.5
-1.6
-0.3
Japan
0.2
-0.1
-0.3
-0.2
China
-7.7
-1.8
-0.2
-9.6
Other DCs
-9.9
0.2
-0.3
-10.0
-15.5
0.0
-2.7
-18.1
WORLD
Indirect effects of CC on agriculture
CC has many other effects, whose impact
on other sectors may indirectly (as well
as directly) affect agriculture even more:
Lower labour productivity, esp. in tropics
• higher temperatures, humidity; more diseases
– Economically far more damaging than yield losses?
Altered energy demand
• less in temperate areas? more aircon in tropics?
Altered tourism (shift away from tropics)
Sea-level rise (hurts S. & S.E. Asia, island DCs)
eg, effects on econ welfare of crop & labor
productivity changes, by 2030(2004 US$ bill.)
Wt
Crop only
Crop + Labor
0.3
0.7
-1.2
-0.9
W. Europe
-0.3
-3.7
Japan
-0.2
-0.0
China
-9.6
-46.7
Other DCs
-10.0
-10.0
WORLD
-18.1
-164.2
Australia
USA
Carbon taxes: a policy response to CC
Direct effect on agric would be small,
except if biofuel policies (which link
food & fossil fuel prices) continue
Indirect effect could be much larger, via
altered terms of trade and hence
exchange rates
Carbon taxes (continued)
Not a new issue
Globally, taxing (or otherwise restricting)
fossil fuel production has similar global priceraising and pollution-reducing effects to
taxing consumption of carbon-emitting goods
Blunter than a more-focused carbon emission tax,
but nonetheless OPEC’s decision to restrict prod’n
in 1973-74 and 1979-80, which raised the int’l
price of petroleum 8-fold, was the world’s first
major carbon-related tax
International market for petroleum before
OPEC formed (equil. at Pw and Q)
Excess Demand
(net importers of oil)
Pw
Q
Excess
SupplyOPEC
International market for petroleum
after OPEC restricts supply to Q’)
ES’
Pw’
ES
Pw
ED
Q’
Q
International market for petroleum after
OPEC restricts supply to Q’)
ES’
Pw’
f
Pw e
d
ES
b
a
g
c
ED
Q’
Q
abc = global welfare cost (to be compared with perceived benefit of carbon reduction)
aefb = welfare loss to non-OPEC countries (net importers of petroluem)
bgef-acg = net welfare effect on OPEC economies
International market for petroleum if
instead non-OPEC countries tax cons’m
ES’
Pw’
f
Pw e
Pp
d
ES
b
a
g
c
ED
Q’
Q
abc = global welfare cost (to be compared with perceived benefit of carbon reduction)
acde = welfare loss to OPEC economies
aefb = welfare loss to non-OPEC consumers, offset by bcdf gain to their Treasury
Carbon emission taxes: summary
A tax on carbon emissions would hurt fossil fuel
consumers in the taxing countries
It would also:
generate govt revenue in taxing countries, so allow
their other taxes to be reduced
lower the seller price of fossil fuels in int’l markets,
and so strengthen (weaken) the terms of trade and
currency for fuel-importing (-exporting) countries
raise the buyer price of fossil fuels, hence also of
substitutes such as biofuels, hence also food prices
But it would also induce innovation in alt. energy
prod’n and cons’n technologies, including biofuels
Some take-away messages
Food self sufficiency will decline substantially in China
under current policies, and is likely to be arrested
only if there is much faster agric TFP growth
... adding political pressure for agric supports/higher tariffs
Trade liberalization by ASEAN+6, if done unilaterally
on an MFN basis, could generate 3x the global gains
of doing it only preferentially, and would provide
Developing Asia with nearly half the gains they would
get from full global MFN free trade
And it boosts food cons’m, hence food security in Asia
ANZ’s export focus on Developing Asia will continue
to strengthen
Shares treble between 2004 and 2030
Some take-away messages
Continued rapid growth of resource-poor
emerging economies could push up int’l food &
fuel prices and thus threaten FS in other DCs
Made worse by HICs’ biofuel policies that link food
& fuel prices
Int’l food price rise would be less if those DCs chose
ag protection path, but that would ‘thin’ int’l food
markets
In ROW, FS might improve in food-exporting
countries and worsen in food-importing
countries
But effects of h’holds differ even within countries
Some take-away messages (cont.)
Actual FS effects on individual h’holds depend
on impact of product and factor prices on both
their earning and their spending
Very complex to model, requires detailed recent
(and ideally prospective) h’hold survey data
Expanded public investment in ag R&D would
help, as would GMO regulatory reform and
further trade reform (WTO’s Doha Agenda)
Meanwhile, ICT revolution has provided a new
social protection pathway to improve FS:
conditional cash transfers to worst-affected
households
Thanks!
[email protected]
Agric NRAs (%) of HICs and DCs
approaching zero since 1980s ...
60
HIC & ECA,incl. Decoupled payments
50
Developing countries
40
percent
30
20
10
0
1955-59
-10
-20
-30
1960-64
1965-69
1970-74
1975-79
1980-84
1985-89
1990-94
1995-99
2000-04
2005-10
... but, in DCs, phasing out of export taxes was
accompanied by rising agric import protection
HIC & DC shares of global ag. trade
High-income
Developing
of which China:
Other Asia:
World
World export
share (%)
World import
share (%)
2007 2030
2007 2030
65 63
35 37
4
0
11 12
100 100
68 42
32 58
4 28
10 14
100 100
Agric self sufficiency (%)
2007 2030 2030 slow 2030 faster
base core prim TFP Ch/In grain
growth TFP growth
All Dev. Asia
96
89
93
90
China
97
87
92
87
102
97
103
98
India
Grain self sufficiency higher
with faster ACI grain TFP (%)
China
India
Rice
Wheat
2030 2030 fast
base grainTFP
2030 2030 fast
base grainTFP
94
104
98
109
94
89
98
96
Ag NRAs are on rising trend for DCs,
but still below ag NRA for HICs
High-income countries
Developing countries
20
70
y = 0.5826x - 1162.1
60
10
50
0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
NRA (%)
40
y = 0.3716x - 703.11
y = -1.5305x + 3089.9
-10
30
-20
y = 0.3228x - 657.5
20
-30
10
-40
0
1960
1970
1980
1990
2000
2010
Trade reform does little to ag self-suff (%)
2030 ASEAN ASEAN
core +6, no
+6,
agric
with
agric
ASEAN Global
+6, libn vs
MFN ag prot
All Dev.
Asia
ASEAN
87
87
87
85
85
85
84
87
86
86
China
83
82
82
80
79
100
100
102
99
100
India
... but it boosts household cons’m of agric
products (% different from core sim in 2030)
ASEAN+6 ASEAN
without
+6,
agric with ag
All Dev. Asia
ASEAN
China
India
0.0
0.9
0.0
-0.3
0.7
1.7
0.2
0.4
ASEAN
+6,
MFN
Global
libn vs
ag prot
1.6
3.4
0.9
1.3
2.7
4.4
2.1
1.4