Global trade in food has more than tripled in value since 2000 to $3 trillion, driven by strong economic expansion and population growth in emerging markets. China, a net exporter of food products until the millennium, is now second only to Japan as a net importer.
Brazil, Indonesia and India have become major agricultural exporters while the US and Europe have seen their share of global food exports fall.
Developed countries agreed to cut their maximum agricultural tariffs by an average of 36 per cent between 1995 and 2000, yet agriculture remains one of the most protected industries in international trade.
Not only do some countries still levy high and complex duties, some impose other measures such as labelling and product certification requirements, or strict biosecurity rules and food-safety standards that can restrict trade.
Current trade disputes and rising protectionism risk harming global food trade. China, the EU, Canada, Mexico and Turkey were among countries imposing retaliatory tariffs last year on more than 800 US food products worth $26.9bn.
Farming has traditionally been highly state-supported. Although producer support in OECD countries has declined from nearly 30 per cent of gross farm receipts to around 18 per cent over 20 years, it has increased in developing countries from 3 per cent to 14 per cent, largely because of China.
World Trade Organization members agreed in 2015 to eliminate agricultural export subsidies but domestic support remains a key issue in multilateral negotiations. For example, India’s government insists that programmes to purchase produce from farmers at fixed prices for food security reasons should be exempt from certain WTO agricultural subsidy allowances.
The global population is forecast to reach 8.6bn in 2030, with 35 per cent located in India and China. Africa is expected to have rapid and sustained population growth.
Emerging-market countries are growing and urbanising and could account for half of global GDP by 2030 and contribute 70 per cent of global growth. The size of the global middle-class could increase from 3bn to 5.4bn according to some estimates, with nearly two-thirds in the Asia-Pacific. Total middle-class spending could nearly double.
That will impact consumption patterns. As incomes rise, people demand more meat, dairy, processed foods, fruit and vegetables. Future food demand will be largely driven by population growth, particularly from emerging-market economies in Africa, the Middle East, India and China.
But consumers in developed economies – especially millennials – are increasingly concerned with issues such as food origin, environmental concerns and animal welfare. Climate change may improve some crop yields but could cause yields to decline by as much as 50 per cent in many countries in the next 30 to 35 years. This will likely affect countries’ net trading positions and change agricultural trade patterns.
Food innovations such as alternative proteins and new technologies may help address food security and environmental concerns but they could also displace traditional agricultural exports and change how food products are produced and traded.
New regulations must strike a balance between achieving food-safety goals and facilitating innovation. Comprehensive trade liberalisation that tackles tariffs and non-tariff barriers is essential.
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