Agriculture and Rural Development
The successful conclusion of the Trans-Pacific Partnership (TPP) negotiations has generated a lot of interest. While much of the discussion has focused on what the mega-regional trade agreement – the largest in a generation – means for environmental or labor standards, equally important are the regulatory standards on agricultural and food products known as Sanitary and Phytosanitary (SPS) measures, which are addressed in Chapter 7 of the agreement.
But how much do SPS standards really matter for trade?
Countries impose food safety standards for good reason, namely to protect the health of domestic consumers. However, domestic food safety standards often deviate from international ones. From an exporter’s point of view, such standards are likely to be seen as barriers to entry. Producers must modify production processes in order to meet each individual market’s product regulations, which raises the cost of the product for consumers. Economists and policy-makers are hungry for micro-level evidence on the effects of such standards on trade.
New World Bank Group research (Fernandes, Ferro, Wilson 2015) offers a first look at how a specific set of mandatory product standards—in this case, the maximum pesticide residue permitted on unprocessed food—impacts exporters. Novel firm-level data for exporters from 42 developing countries from 2006-2012 were analyzed along with data on pesticide standards for 243 agricultural and food products in 63 importing countries. We found that pesticide standards differ greatly across countries.
West African countries have been working for many years to develop and implement harmonized trade rules for crop inputs. While much remains to be done, new regional regulations for seed and fertilizer are already helping to guide quality improvements in some countries. The West Africa Seed Committee is due to be launched next week in Abidjan thereby clearing the way for establishment of a regional variety catalog and seed certification system. Work to operationalize the regional rules for fertilizer also continues.
Despite these positive developments, most West African countries are a long way from having the required capacities and institutional structures needed to implement their own trade rules. The agreed regulations are modeled on advanced international standards, yet most national regulatory systems for crop inputs are greatly overstretched if they exist at all. As a result, it will likely be many more years before true harmonized regional trade can begin.
A new World Bank Group Africa Trade Working Paper looks at these challenges and shows that simple solutions including unilateral and joint action by small groups of countries should not be ruled out as a way to fast-track progress and support long-term harmonization.
The Economic Community of West African States (ECOWAS) is making some real progress in regional integration. After decade-long negotiations, it has just launched its own Common External Tariff (CET), and now a final proposal for an Economic Partnership Agreement (EPA) with the European Union is also on the table.
However, vast differences in opinion remain regarding the likely effects of these reforms. In Nigeria—a key player in the region— debate is currently lively as to whether the country should sign the EPA, with some local stakeholders wary of the proposed reduction in trade protection.
Noting these concerns, the World Bank Group recently shed more light on the anatomy of these trade shocks. By analyzing detailed trade and firm data in a simple short-term framework, we were able to pick up details that are important determinants of how the reforms might play out—even in the longer run. The full reports can be found here, along with a non-technical policy note.
So what did we find?
We welcome 2015 confronting an all-too-familiar reality: there are still people in the world without access to sufficient and nutritional food. One in eight people go hungry every day, according to the United Nations, including an estimated one in six children under the age of five who is underweight. The situation is especially dire for those living in extreme poverty, whose inadequate access to technology, land, water, and other agricultural inputs routinely imperils their ability to produce or secure food for themselves and their families, especially as world food prices have risen in recent years.
On a scale of one to something-must-be-done-now, tackling this problem and ensuring food security remains among the most pressing development issues of our time. The good news is the first Millennium Development Goal to eradicate world hunger is achievable—and the target to halve it by the end of this year is close to being met. But governments have too often failed to meet their obligation to nurture an enabling environment for food security, and in some cases have actually made it worse.
Trade policy can be a proactive—rather than a reactive—tool in helping to ensure greater food security, a theme expounded in our recent publication entitled Trade Policy and Food Security: Improving Access to Food in Developing Countries in the Wake of High World Prices. Although world food prices have risen in real terms in recent years after three decades of decline, there is no global shortage of food. The problem is one of moving food, often across borders, from areas with a production surplus to those with a deficit, at prices that low-income consumers in developing countries can afford.
Turkey’s bid to join the European Union (EU) may finally be getting “back on track,” according to the bloc’s top official for enlargement. And while that track may still have a number of hurdles to clear, recent research, carried out by the World Bank Group outlines several interim policy measures that could bring the sides closer together while also benefitting the Turkish economy.
Most goods already move freely between the two economies, under the EU-Turkey Customs Union established in 1995. But agriculture, as is often the case, has proved a sticking point and remains outside the Customs Union today.
A set of permanent institutions, established under the 1963 Ankara Agreement, have chipped away at agricultural trade restrictions. These have steadily provided technical support and helped to facilitate quick action when political opportunities have arisen. And today there is still opportunity to take action on agriculture—with or without becoming an EU Member State.
Africa’s imports of staple foods could more than triple in the next 15 years. Without an increase in crop yields and an improvement in the trade of surplus food from areas with good growing conditions to deficit zones, importing sufficient amounts of staple food could cost the continent upwards of US$150 billion per year by 2030.
Fortunately, it doesn’t have to be this way. As the World Bank showed in its 2012 report, Africa Can Help Feed Africa, the continent could easily deliver improved food security to its citizens through increased regional trade.
Often the nearest source of inputs or best outlet for farm products is a across a border, yet high costs and unpredictable rules make trade difficult and discourage investments by small farmers in raising productivity and large investments by private companies in input supply and food marketing.
Facilitating regional trade is therefore more important than ever for reducing poverty and meeting Africa’s growing demand for staple foods.
At the Ninth WTO Ministerial Conference held in Bali on December 2013, all WTO members reached an agreement on trade facilitation and a compromise on food security issues, a contentious topic which had previously stalled talks during the 2008 Doha Development Round. The “Bali Package,” as it came to be known, was quickly heralded as an important milestone, reaffirming the legitimacy of multilateral trade negotiations while simultaneously recognizing the significant development benefits of reducing the time and costs to trade.
Seven months after the Bali Ministerial Conference, however, the Trade Facilitation Agreement (TFA) has yet to be ratified as India is concerned that insufficient attention has been given to the issue of food subsidies and the stockpiling of grains. India maintains that agreements on the food security issue must be in concert with the TFA.
Despite the current impasse in implementing the Bali decisions, the food security concern at the heart of the matter sheds light on the importance of improving the agribusiness supply chains of developing countries to ensure maximum efficiencies. Consider the fact that in 2014, farmers will produce approximately 2.5 billion tons of food. Yet, 1.3 billion tons are lost or wasted each year between farm and fork, while 805 million people suffer from chronic hunger.
- Doha Round
- Bali Agreement
- Trade Facilitation Agreement
- trade facilitation
- supply chains
- Agriculture and Rural Development
- South Asia
- Middle East and North Africa
- Latin America & Caribbean
- Europe and Central Asia
- East Asia and Pacific
- The World Region
- Macedonia, former Yugoslav Republic of
- Lao People's Democratic Republic
Editor's Note: "Notes From the Field" is an occasional feature where we let World Bank Group professionals conducting interesting trade-related projects around the globe explain some of the challenges and triumphs of their day-to-day work. The views expressed here are personal and should not be attributed to the World Bank Group. All interviews have been edited for clarity.
The interview below was conducted with Mariam Diop, a Senior Economist with the World Bank Group. Mariam is based in the country office in Ouagadougou, the capital of Burkina Faso, where she carries out work in the WBG’s new Macro and Fiscal Management Global Practice. Mariam has been deeply involved with the country’s Diagnostic Trade Integration Studies (DTIS), which has helped to identify a number of key restraints on economic growth and shared prosperity in Burkina Faso. The Trade Post spoke with Mariam about what brought her to the country, where she sees opportunities, and how the DTIS has helped on the ground.
For nearly three-fifths of the world population, the lack of access to energy is a major challenge to economic development and poverty reduction.
Increasing cross-border trade in electricity can play a major role in helping overcome these challenges. Trade in electricity can help bring down energy prices, mitigate against power shocks, relieve shortages, facilitate decarbonization and provide incentives for market extension and integration.
Yet, countries have been reluctant to trade electricity across borders. Global exports of electricity are currently around 3 percent of total production. This is an anomaly in the energy sector. Think of oil. Roughly 64 percent of all oil produced is traded between countries.
A recent working paper published by the World Bank looks at the institutional arrangements of regional power pools in both developing regions and those in developed countries. In understanding how the regional integration of electricity markets has developed, the paper is able to draw useful lessons for the promotion of future trade arrangements.