Agricultural trade in a post-pandemic world

Food security and food safety issues during the COVID-19 pandemic call for a full-fledged action plan on agricultural trade with a view to ensure undisrupted flows of essential food commodities, on the one hand, and developmental aspirations of developing countries, and especially least developed countries (LDCs), on the other hand. This policy brief proposes a new G20 Plan of Action on Agricultural Trade in a Post-Pandemic World. The Plan should focus on the issue of export restrictions on a priority basis in view of the food security implications of export barriers imposed on food commodities, as well as the vulnerability of developing countries, especially low-income, food-import-dependent countries, to the disruptive effects of uncooperative trade instruments in general. Other important areas to tackle include addressing market access barriers in agricultural products, namely sanitary and phytosanitary (SPS) measures and technical barriers to trade (TBT), which would prevent a post-pandemic expansion of food trade for the global South and impair developing countries’ participation in key decision-making processes and institutions, and in global food value chains.

Challenge

Inclusive, sustainable and undistorted agricultural trade is critical not only to ensure global food security but also to respond to the developmental aspirations of developing countries, especially least developed countries (LDCs). At the same time, the COVID-19 pandemic has exacerbated recourse to trade-restrictive measures on agricultural products, both on the export side, in the form of export prohibitions and other restrictions, and on the import side, in the form of non-tariff measures (NTMs) such as sanitary and phytosanitary (SPS) measures and technical barriers to trade (TBT). While such export and import barriers may contribute to local food security and food safety goals, they point to the dangers of shortening global food supply chains. Such disruptions will disproportionately affect the global South and impoverish vulnerable producers, especially women. In May 2021, the Food and Agriculture Organization’s (FAO) Food Price Index (FFPI), which is a measure of the monthly change in international prices of a basket of food commodities, marked the twelfth consecutive monthly rise in the value of the FFPI, reaching its highest value since September 2011 (FAO, 2021). Increasing food and food import bills are pernicious, especially for low-income, food-import-dependent countries (LIFIDCs), which already struggle to integrate into global agricultural trade. Their food insecurity increases even more without the provision of international food aid supplies as and when needed.

Against this backdrop, three main critical challenges call for action on the part of the G20 with a view to harnessing the contribution of trade to more food security and food safety, while at the same time avoiding unnecessary disruptions to global supply chains in the agricultural sector.

1. STRENGTHENING RULES ON FOOD EXPORT RESTRICTIONS

The agricultural sector was exposed to new export bans and quantitative restrictions (QRs) at the most critical point during the COVID-19 crisis (OECD, 2021; Hepburn et al., 2020).¹ Such measures mainly targeted essential food commodities such as key staples (e.g. rice and maize) in spite of unambiguous World Trade Organization (WTO) rules and transparency requirements, with detrimental impacts on world export supplies and prices and disproportionately high costs in terms of food security for LIFIDCs already facing a significant COVID-19-induced contraction in agricultural trade (Espetia, Rocha and Ruta, 2020). The latest escalation in food export restrictions has dramatically demonstrated the limits of existing export disciplines both on the substantive side (i.e. the regulation of duties and QRs, especially at times of “critical shortages of supply”) and on the procedural side (i.e. transparency requirements). Furthermore, it has revived the urgency to prioritize action on prohibiting export restrictions on food purchased for humanitarian purposes, building on repeated statements at the WTO (WTO, 2020b) and already existing G20 commitments (G20, 2011), especially those formulated by the G20 Agricultural Ministers against “export restrictions or extraordinary taxes on food and agricultural products purchased for non-commercial humanitarian purposes” (G20, 2020a, 2020b).

2. TACKLING MARKET ACCESS BARRIERS IN AGRICULTURAL PRODUCTS

Concerns over the use of agricultural market access barriers, particularly in the form of NTMs, have gained prominence owing to the impact of NTMs on the global South’s attainment of sustainable growth and development (Kareem, 2016). Changing demand in the G20 and the still ongoing COVID-19 pandemic have enhanced the incidence of NTMs especially SPS and TBT measures to ensure food safety and food security. Although these measures are meant to be for health purposes, their stringency often reduces growth opportunities for the global South (Kareem, 2014, 2019). This is mainly due to high compliance costs associated with the commodities’ production, processing and marketing upgrades (Kareen and Rau, 2018), which impact market access. The challenges have been exacerbated during the COVID-19 pandemic due to the escalation in governments’ measures aimed at curtailing the virus. The costs of “consumption going local” are heavily felt by exporters from Africa, the Caribbean and Pacific countries.

3. STRENGTHENING DEVELOPING COUNTRIES’ PARTICIPATION IN GLOBAL VALUE CHAINS AND IN KEY DECISION-MAKING PROCESSES AND INSTITUTIONS

Integration of the global South in global food value chains is a key requirement for ensuring food security and economic development in today’s globalized world (Nier, Klein and Tamásy, 2019). The COVID-19 pandemic has led to shorter supply chains, thereby reducing especially South-North trade. This trend reinforces the importance of global cooperation for an uninterrupted global food supply (Deconinck, Avery and Jackson, 2020). The inclusion of the global South in food value chains has been acknowledged to have multiplier effects on employment and poverty reduction (The World Bank Group, 2020). However, the challenge lies in the inadequate capacity to participate owing to poor levels of agricultural technology, obsolete quality infrastructure, restrictive trade measures and non-/sub-representation in the decision-making processes of key institutions such as the International Monetary Fund (IMF) and the World Bank (Bernal, 2009), as well as in a number of existing initiatives and institutions involved in agricultural trade issues (e.g. the Agriculture Market Information System (AMIS)). A suboptimal number of food processing centres and the impact of climate change further complicate the challenges, leading to additional impediments to resilient and sustainable agriculture (UNCTAD, 2021).

Proposal

1. STRENGTHENING RULES ON FOOD EXPORT RESTRICTIONS

The latest escalation in food export restrictions has demonstrated how easy it is for many governments to introduce export restrictions in spite of existing WTO rules and transparency requirements. Given how rapidly and pervasively governments resorted to export restrictions at the outbreak of the COVID-19 pandemic, it is reasonable to assume that such measures will be introduced again when countries feel the need for food security. For this reason, the G20 should play a key role in reforming counter-intuitive rules on export restrictions. Three groups of proposals, distinguished according to their level of ambition, are at the centre of a new G20 Plan of Action on Agricultural Trade in a Post-Pandemic World.

– At one end of the spectrum are proposals focusing on transparency as an immediate option for progressive policy reforms. A number of reform proposals and decisions have been taken since the late 1990s by the G20 and a number of other international bodies and institutions, from the WTO itself to the FAO (Espa, 2015). Such proposals have explored avenues to strengthen the procedural requirements under Article 12.1 of the WTO Agreement on Agriculture (AoA) insofar as they provided for, inter alia, (i) a prior notification obligation with strict and binding time frames; (ii) the obligation to demonstrate that the introduction of export measures has no appreciable effect on food aid for LIFIDCs; and (iii) the obligation to enter into consultations, in all cases, matched with the obligation to suspend the implementation of the measure/s during consultations as well as the obligation to accept the binding arbitration of a “standing committee of experts” if consultations are not concluded within a reasonable time frame (Espa, 2021). Although such proposals have remained largely unattended to date, they still provide a valuable basis on which to advance the issue of transparency of food export restrictions, especially while momentum is high due to the extreme vulnerability to disruptions of global food value chains experienced during the COVID-19 crisis.

– At the other end of the spectrum are proposals for more stringent and coherent rules on the export side. With regard to export QRs, efforts should focus on the development of an operational, food security-informed definition of “critical food shortage” and of the “temporarily” requirement for the purposes of seeking justification under Article XI:2(a) GATT (FAO et al., 2011; Espa, 2015). With regard to export duties, efforts should focus on how to overcome the inconsistencies of the ad hoc export duty commitments assumed by a large number of newly acceded WTO members with different legal techniques. Ideally, new disciplines on export duties will aim at levelling the playing field by creating symmetric elimination obligations across members matched with adequate flexibilities to account for legitimate goals (Espa, 2015). In this respect, regional trade agreements (RTAs) may offer a way forward to the general elimination of export taxes and duties matched with Article XX GATT-like exceptions, along with references to non-trade concerns such as sustainable development, which could serve as context for interpreting such exceptions (e.g. Ukraine Woods Products).

– While the most ambitious proposals may not be immediately acceptable, a number of areas could be prioritized by the G20 with a view to garnering consensus on the need to put the issue of export restrictions squarely at the top of the international agenda. A strategic item in this respect concerns the issue of export restrictions for food aid purchases by international organizations, namely the World Food Programme (WFP) and the International Committee of the Red Cross (ICRC). The G20 has already looked into the issue of food export restrictions or extraordinary taxes on food purchased for non-commercial humanitarian purposes (G20, 2011).² More recently, around fifty WTO members have committed to refrain from imposing “unjustified export restrictions” with a view to ensuring food security and avoiding food shortages (WTO, 2020b). Another source of more advanced rules on export restrictions that may contribute to accelerating progress on the multilateral front are latest-generation RTAs, which are increasingly including stronger-than-WTO provisions on export restrictions (e.g. EUVietnam free trade agreement).

2. TACKLING MARKET ACCESS BARRIERS IN AGRICULTURAL PRODUCTS

The restrictiveness of market access barriers such as SPS and TBT measures is impacting the intensiveness of global agricultural trade and global value chains (GVCs). The existing NTMs in the G20 that have generated continuous concerns in the global South need to be re-examined. Hence, the need to consider the following proposals.

Trade-related

– The G20 should stem the proliferation and limit the stringency of their SPS/TBT measures beyond international standards, reduce the preponderance of the precautionary principle and ensure the application of the equivalent principle in the WTO SPS Agreement. This will improve the global South’s market access and assist them in their quest for sustainable development, especially during the COVID-19 pandemic and post-pandemic.

– The G20 should extend technical assistance to the global South to upgrade their quality infrastructure such as metrology and calibration, product testing, certification, inspectors, assessors and conformity assessment facilities, vis-à-vis laboratories, accreditation centres, technical know-how and so forth. This should be guided by global goals aimed at reducing the number of undernourished people (Sustainable Development Goal 2 End Hunger) and assisting rural development.

– Regulations of technical and non-technical measures in the G20 should be reformed to guarantee “fair competition” for global South exporters. Trade-distorting agri-food subsidies, that is, production subsidies and incentives that impact the competitiveness of the global South and give domestic competitors an undeserved competitive edge in the G20 market, should be drastically reduced or eliminated.

– The continuous dumping of agri-food, particularly in the livestock sector in Africa, must be eliminated. At the same time, the establishment and inflow of large-scale foreign investment into the livestock sector in Africa is required in order to reduce its climate footprint and enhance employment.

– Maize trade in Africa plays a key role in guaranteeing grain access and stabilizing prices with strong seasonal fluctuations. Increased African participation in the AMIS will allow for better monitoring of maize markets. Furthermore, the G20 as well as African countries should refrain from introducing export restrictions on maize, particularly when it comes to shipments from the UN humanitarian agencies (see below).

Non-trade-related

– The G20 should provide better technical assistance to the global South, particularly African countries, in the areas of modern technologies in the food system, upgrading of facilities for food safety and provision of quality infrastructure support to enhance agri-food market access.

– The G20 should ensure that SPS/TBT measures are based on scientific justification of every potential health concern raised and that recourse to SPS measures based on precaution are rationalized to the extent that they impact more on global South countries’ access to the G20 market.

– G20 countries should align their SPS/TBT measures to the international standards from the CODEX Alimentarius Commission, the International Plant Protection Commission (IPPC) and the Animal Health and Zoonoses (OIE). This is because it has been established that some G20 regulations and standards, especially in the European Union, USA and China, are more stringent than the relevant international standards, for which scientific justification is not always provided.

– Global South countries must develop the SPS capacity of their producers, food supply chain operators, food safety regulatory institutions, policy-makers and legislators to ensure conformity with the quality requirements at their export markets.

– The agro-industry in Africa should be supported in the provision of the required science and technology, especially in terms of quality infrastructure, to propel value additions to their crude agricultural exports and better integration in global value chains from commodity-exporting to value-added products exporting (limited manufacturing). Moreover, the reinforcement of existing initiatives aimed at building closer cooperation with African countries, such as the G20 initiative on Support Industrialisation in Africa and LDCs and the G20 Africa Partnership with its Compact with Africa, could be useful in the transformation agenda of the continent.

– Developing countries must upgrade their institutional, production, processing and distribution facilities to enhance export quality, particularly to the G20. To accomplish this, G20 support is needed in the form of technical cooperation, given their advances in science and technology and continuous innovations.

– African participation within the AMIS should be expanded. Nowadays only South Africa, as a G20 member, and Egypt and Nigeria, as invited countries, take part in this inter-agency platform. More African engagement could not only improve AMIS information sharing on both agricultural markets and policies, but also strengthen the capacity of its Rapid Response Forum when dealing with disturbances in market conditions. This could be done either by the incorporation of individual African countries into AMIS, or by having the African Union (AU), a G20 observer, work as a partner agency, through the AU Commissioner for Rural Economy and Agriculture.

– The pandemic led to a substantial increase in food insecurity worldwide. According to the FAO and the WFP, 130 million people could have become food insecure by the end of 2020, most of them in Africa. This adds to the more than 820 million that were already in that category by the beginning of 2020. To address this issue, stronger monitoring efforts will be needed for agricultural commodities which are vital for food security in Africa such as maize, which is used both for human consumption and as feed for livestock.

3. STRENGTHENING DEVELOPING COUNTRIES’ PARTICIPATION IN GVCS AND IN KEY DECISION-MAKING PROCESSES AND INSTITUTIONS

Developing countries’ alignment and integration into GVCs and regional value chains (RVCs) in agri-food provide the opportunity to expand and accelerate food production and improve food supply chains, which have the potential to mitigate food insecurity in the global South and ensure a sustainable global food market. The loss of lives and livelihoods during the COVID-19 pandemic has signalled the need to create a resilient global food market. Hence, cultivating a trade-friendly environment and strengthening global food value chains further requires nurturing information sharing so that supply can be adjusted according to global demand. At the same time, developing countries may benefit from stronger participation in key decision-making processes and institutions at the global level dealing with agricultural trade, including the WTO and concerned institutions such as the FAO, International Fund for Agricultural Development (IFAD), World Food Programme (WFP) and International Food Policy Research Institute (IFPRI), that are engaged in research, extension and training activities. The following proposals are submitted for the consideration of the G20.

3.1 Strengthening developing countries’ participation in GVCs

– There is a need to improve the application of existing initiatives such as AMIS to assist global South economies in addressing the issue of demand-supply misalignment,³ which must be done in coordination with Global Agricultural Monitoring Initiatives (GEOGLAM).⁴

– Innovation and technology diffusion through participation in GVC/RVC must be encouraged to enable the global South to cope with market access challenges, particularly in the G20.

– Initiatives such as the Platform for Agricultural Risk Management (PARM)⁵ must be extended to more economies to make risk management an integral part of agricultural policy and investment planning.

– G20 should promote climate-friendly agricultural farming practices and technologies to enable a resilient global food system. A transparent and predictable global macroeconomic policy environment is necessary to ensure unhindered participation by developing countries in global agri-food chains. This will further facilitate the proper integration of agro-industry and/or the entire food system with GVCs.

– The policy on food safety and food security and nutrition must conform to international standards to ensure the flow of foreign investment in the food system to enhance food supply, particularly during the COVID-19 pandemic.

– Liberalization of agri-food trade policy is necessary to ensure onshoring and the continuous engagement and operation of agro-industry to promote the resilience of the global food market to shocks.

– G20 support for enhancing investment in research and development and the diffusion of technology can help developing countries to specialize and stimulate their participation in high commodity levels in GVCs.

– In order to minimize the adverse environmental impact of intensive agriculture and sustained participation in GVCs, low-carbon and chemical-free agricultural techniques and practices should be adopted.

– Organic farming should be encouraged, and the G20, in coalition with its other initiatives such as Meeting of G20 Agricultural Chief Scientists (MACS), Platform for Agricultural Risk Management (PARM) and others, should create a platform to educate farmers about sustainable agricultural practices.

– To provide a robust and predictable investment environment for agriculture with an aim to promote exports, transparency and flexibility in land and labour policies is desirable.

3.2 Strengthening developing countries’ participation in key decision-making processes and institutions

– The financing initiative of the Global Agriculture and Food Security Program (GAFSP)⁶ should be used in conformity with the fair-trade rules to support poor countries to achieve global prosperity and move towards the UN Sustainable Development Goals.

– The G20 should engage with major international development banks and research institutions to stimulate sustainable innovations in the global South.

– The G20 should provide support for global South participation in the decision-making processes of key institutions such as the WTO, the FAO and others.

– The G20 should pool its resources to strengthen the global South digital infrastructure and continue to work on key action areas outlined in the G20 blueprint on Innovation and Growth.

– The negotiation process in the Meetings of Agricultural Chief Scientists of G20 States (MACS-G20)⁷ should be more inclusive to accommodate the interests of all countries.

– The G20 should assist the global South to increase access to the general special drawing right allocation at the IMF, especially during the COVID-19 pandemic, which could be used to supplement their economies and to overcome current and likely post-pandemic challenges.

KEY CONCLUSIONS AND RECOMMENDATIONS

This policy brief proposes a new G20 Plan of Action on Agricultural Trade in a Post-Pandemic World.

One key priority area to address immediately is the issue of export restrictions. The use of such measures reached a new high during the COVID-19 crisis, within and beyond the agricultural sector. When imposed on food commodities, however, such uncooperative trade instruments negatively impact on food security prospects, with disproportionate effects on vulnerable developing countries, especially LIFIDCs. Hence, the issue of export restrictions preventing international food aid purchases must be prioritized with a view to garnering consensus rapidly and building confidence on the prospects for further progress in the area within the G20 and, in turn, multilaterally. The topic is in fact critical for the G20 countries not only with respect to the agricultural sector but beyond it as well. Most of them have actually suffered or are likely to suffer from the consequences of the upsurge of export restrictions in many critical sectors. This is even more so in anticipation of the new super-cycle and the latest revival of industrial policy to cope with the economic consequences of the pandemic and with increased exposure to foreign supply of strategic supplies.

The other elements of the G20 Plan of Action on Agricultural Trade in a Post-Pandemic World are closely related to the proposals made in this policy brief. These proposals are summarized as follows:

– All market access barriers for agricultural products should be addressed, especially those preventing a post-pandemic expansion in food trade for the global South.

– At the centre of these barriers stand SPS and TBT barriers, particularly those confronted by cash-crop-exporting developing countries.

– Developing countries’ participation in key decision-making processes and institutions, and in GVCs, should be promoted.

– The G20 should provide increased technical assistance and cooperation for meeting import market regulations and demands.

– Such programmes should focus especially on African countries in the areas of adoption of modern technologies in the food system, upgrading of facilities for food safety and provision of quality infrastructure support to enhance access to the agri-food market, with special attention to LIFIDCs.

– The G20 Meeting of Agriculture Ministers in Florence, Italy (19-20 September 2021) should urgently address these issues, also with a view to keeping up momentum towards the WTO MC12.

NOTES

¹  The agricultural sector has regularly been subject to export restrictions due to cyclical factors (Espa, 2015), with the most dramatic wave occurring at the time of the food crises in 2007-8 and 2010-11 (Anderson and Nelgen, 2012). The 2020 escalation is part of a more general trend, which has affected medical devices even more (WTO, 2020a) and may well increasingly affect raw material prices (e.g. mineral products, forestry products) within the context of a new super-cycle (The Economist, 2021).

²  In the Doha Round, in dispute settlement and on other occasions it became apparent that this issue cannot be solved in isolation. The decisions taken on food export restrictions by the G20 summits in Cannes (2011) and in Los Cabos (2012) to at least exempt the WFP and other non-commercial food purchases from export restrictions and prohibitions, as well as the G20 Summit in St Petersburg (5-6 September 2013), failed to result in specific WTO ministerial decisions and rules.

³  https://www.amis-outlook.org.

⁴  https://earthobservations.org/geoglam.php.

⁵  https://www.p4arm.org.

⁶  https://www.gafspfund.org.

⁷  https://www.macs-g20.org.

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