What impact will trade agreements have on global food markets?

CANBERRA — The political uncertainty surrounding the Trans-Pacific Partnership Agreement and North American Free Trade Agreement, as well as the implications of Brexit, has left experts struggling to understand what their impacts will have on markets — particularly in developing countries.

Add to the mix the growing threat of trade war, and the future looks even hazier.

But what, specifically, would changing trade agreements mean for global food security?

Phil Pardey, the director of the International Science and Technology Practice and Policy Center at the University of Minnesota, spoke about this topic at last month’s 2018 Australasia Agricultural and Resource Economic Society conference in Adelaide. Speaking to Devex after the conference, he explained how the future of food security is likely to be shaped by private business objectives.

Trade agreements do nothing for building agricultural capacity in developing countries

According to Pardey, the largest challenges for agriculture and food security in regions such as East and sub-Saharan Africa are around research and logistics.

“In my work, I’ve been looking at big structural shifts in investment of food research and development in developing countries,” he said.

In “rich” countries such as the United States, United Kingdom, and Australia, Pardey said there is a “slowing down of investment” in R&D, which directly impacts performance of agricultural sectors.

In comparison, agriculturally large middle-income countries such as Brazil and China have been amping up their investments.

“But the low-income countries have tenuous research systems, sporadic government support, and the worrying thing for me is the gap,” Pardey said. “For the low-income countries, the knowledge gap is widening. That has long-run, fundamental implications for their ability to not only export, but feed their own people. And they are not good implications.”

Trade agreements, which Pardey sees as only beneficial to larger countries within the agreements, are not providing opportunities to expand and share research. Nor are they responding to the logistical challenges of reaching markets for some of the more remote developing communities.

“Sixty percent of the crop land in sub-Saharan Africa is seven hours away from a market of just 25,000 people,” Pardey said. Half of that time is off-road — on the crappiest roads you can think of. You could liberalize all the trade policies that you like, but these people can’t even engage within countries.”

Why the private sector matters more

With his research based in Minnesota, Pardey has at his doorstep some of the largest Fortune 500 companies working in agriculture. And he is seeing impressive results in creating change in some of the remotest developing communities.

Land O’Lakes, for example, has been working with smallholder dairy production in East Africa, paying close attention to local supply chains.

General Mills, also based in Minnesota, has the Partners in Food Solution program where they are partnering with organizations such as Cargill and Bühler to provide support and assistance in building small food processing operations in sub-Saharan Africa.

The investment of large companies such as this is based on business drivers.

“They are mainly driven by population projections,” Pardey said. “Population projections to 2050 shows that 90 percent of the population growth will be in Africa — there is huge market potential in Africa and they are looking at how they can help leverage that.”

For Land O’Lakes in particular, Africa is a region that has seen a high growth in dairy consumption — and with a growing population, it is smart business to invest.

The United States Agency for International Development and TechnoServe, Pardey said, have been among the donors to recognize this development potential and are working to stimulate private sector investment in supply chains. “It’s an area that is really taking off and gaining traction.”

Public versus private influence

Pardey believes that public policies, include trade agreements, have limited influence on the decision for a private company to invest in a developing countries to improve and grow food markets, and security with them. It is the standards and policies developed by private sectors themselves that are influential.

“If you’ve got WalMart — the largest retailer of food in the U.S. — and they are insisting on sustainability targets for their suppliers, food companies like Pepsi need to respond to that,” he said. “And that feeds all the way down to the farmers that produce the crops that they are growing.”

And as these companies move into developing countries, they have risk and reputation they need to manage, and carry these sensibilities into new markets

“My personal view, having been in this game a long, long time, is that it is still embryonic but the growing assistance focus of countries like these in markets such as Africa have the real potential to shift the game,” Pardey said, in direct comparison to the potential influence of trade agreements.