food security

WTO Secretariat Information Note on COVID-19 and Agriculture

On Wednesday, August 26, the WTO Secretariat put out an Information Note entitled “COVID-19 and Agriculture: A Story of Resilience”. It is one in an impressive line of information notes providing useful information on how COVID-19 is affecting global trade in goods and services. The full array of information notes published to date can be found on the WTO webpage, https://www.wto.org/english/tratop_e/covid19_e/covid19_e.htm. Wednesday’s Information Note is embedded below.

agric_report_e

The note focuses on the fact that trade in agricultural goods have fared better than total trade in goods during the pandemic. The Secretariat, at the time of preparing the Information Note, had access to trade data through April 2020 and for May 2020 for some countries. A key summary paragraph from the note states:

“Trade in agricultural products has been more resilient than overall trade. This reflects the essential nature of food and the resulting relative income-inelasticity of demand for it, as well as the fact that most agricultural trade (notably cereals and oilseeds) takes place in bulk marine shipments that have not been subject to major disruptions. While overall merchandise trade fell sharply in the first half of 2020, agricultural and food exports increased by 2.5 per cent during the first quarter of the year compared to the same period in 2019, with an increase of 3.3 per cent in March, followed by a 0.6 per cent increase in April, although the preliminary data for May indicate a small decrease (-1.3 per cent) compared to 2019.2

“2 Data for May 2020 were available for a limited set of 64 countries at the time of writing.”

Importantly, while some governments imposed export restrictions on some agricultural products early in response to COVID-19, some of those restrictions have been lifted and there have been other initiatives to liberalize trade in agriculture.

However, the note reviews the challenges for many people to get adequate food despite food stocks and good harvests. A prior August 15 post of mine reviewed the challenges facing many nations in accessing adequate food supplies in 2020. See August 15, 2020,  Food security and COVID-19 – how World Trade Organization Members could fill a pressing need, https://currentthoughtsontrade.com/2020/08/15/food-security-and-covid-19-how-world-trade-organization-members-could-fill-a-pressing-need/

The Information Note’s conclusion provides a note of caution on agricultural trade despite the greater resilience of such trade over other trade in goods:

“The COVID-19 crisis has had a major impact on the global economy and trade. Countries are still fighting the pandemic, and its repercussions for food supply chains are still unfolding. While agricultural trade has proven more resilient than trade in other goods owing to the essential nature of food products, additional disruptions to supply chains could start to undermine this resilience, with damaging consequences.

“There is currently no supply-related reason why the ongoing health crisis should turn into a food crisis. However, disruptions to food supply chains constitute a risk for global food security. Governments’ trade policy choices will play a major role in shaping how the situation evolves.

“Transparency remains crucial for food security. Incomplete or insufficient information creates uncertainty that, in turn, leads to sub-optimal policy decisions. Sharing timely information on trade-related measures, as well as making information available on production, consumption, stocks and food prices, would help markets function efficiently and contribute to ensuring global food security.”

U.S. example on agricultural exports suggests greater contraction in 2nd quarter of 2020

U.S. trade data are available through June 2020. At least for the United States, U.S. domestic exports of agricultural products (HS Chapters 01-24) through June 2020 were off from 2019 levels (which were themselves below 2018 levels). On a monthly basis, the contraction worsens month by month after February as the below data on U.S. domestic exports of agricultural goods show (exports are FAS values in billions of US $):

1st half 2018$69.3
1st half 2019$65.6
1st half 2020$64.0
% change 2019-2020-2.50%
% change Jan. 2019-2020+0.13%
% change Feb. 2019-2020+5.04%
% change March 2019-2020-1.46%
% change April 2019-2020-3.95%
% change May 2019-2020-7.17%
% change June 2019-2020-7.67%

U.S. domestic exports of agricultural goods show dramatic differences in trends in 2020 based on the 2-digit HS chapter involved. Chapter 02, meat and edible meat offal, increased in the first half of 2020 by 8.4%; Chapter 04, dairy produce and other products, increased 17.27%Chapter 10, cereals, increased by 1.13%; Chapter 15, animal fats and oils and their cleavage products, increased 23.19%; Chapter 23, residue and waste from the food industry, prepared animal feed, increased 2.43%; the other nineteen Chapters showed declines up to 15.17%.

For the United States, the U.S.-China Phase 1 Agreement appears likely to improve U.S. agricultural exports in the last months of 2020 and hence may change the U.S. trade trend for agricultural goods in the third and fourth quarters. See August 8, 2020,  U.S.-China Phase 1 trade agreement – review of U.S. domestic exports through June 2020, https://currentthoughtsontrade.com/2020/08/08/u-s-china-phase-1-trade-agreement-review-of-u-s-domestic-exports-through-june-2020/.

But the above data for the U.S. suggests that global agricultural trade may be harder hit in the second quarter than the Secretariat Information Note tracks through April (and for partial data for May). All of which simply says the Information Note’s conclusion that transparency and accuracy and timeliness of data are critical at the present time to prevent the COVID-19 health crisis from becoming a food security crisis of even greater proportions than is already projected by the World Food Programme.

Food security and COVID-19 — how World Trade Organization Members could fill a pressing need

In 2020 as the world has been dealing with the health and economic consequences of the COVID-19 pandemic, the World Trade Organization has focused attention on keeping markets open by urging Members to provide notifications of trade restrictive and trade liberalizing measures taken not just on medical goods but also on agricultural products. The G20 countries and various groups of WTO Members have made commitments to impose restrictions only under limited circumstances and only temporarily, consistent with WTO obligations. Some Members have urged countries to agree not to impose export restraints on agricultural goods to limit worsening challenges during the COVID-19 pandemic. On agricultural export restrictions, a number of countries have applied some restrictions despite information that global food supplies are sufficient which should make restrictions unnecessary. The attention paid to the issue by the WTO and its Members have limited the number of countries engaged in agricultural export restraints which is a positive development.

With the steps many countries have taken to limit the spread of the COVID-19, there has been enormous economic pain incurred by most countires, with tens of millions of people in countries temporarily unemployed, schools closed, food distribution disrupted with the closure of restaurants which constitute a large part of food shipped from processing plants and farms.

The UN, World Bank and others have projected huge increases in the number of people pushed into extreme poverty because of the effects flowing from the pandemic. Extreme poverty brings with it food security issues as people suffering extreme poverty don’t have the means to procure basic food needs.

The United Nation’s World Food Programme (WFP) has long been involved in helping address food security needs around the world. In the COVID-19 pandemic, the WFP is mobilizing to provide assistance to some 138 million people in 83 countries. With most countries occupied with dealing with the needs of their own populations, countries and private citizens have been slow to respond to the humanitarian challenges facing so many around the world. The WFP has appealed for US$4.9 billion to let them perform their stepped up function during COVID-19 through the end of 2020. As of August 6, they had received only 9 percent of what they need, $US440 million.

The WFP during the pandemic has been involved in facilitating services by many NGOs and international organizations. For example, “Over 16,500 health and humanitarian personnel from 288 organizations have now been transported to destinations throughout Africa, Asia, the Middle East and the Commonwealth of Independent States countries by WFP’s air passenger service since its launch on 1 May. 53 destinations are now being served, with approximately 2,500 passengers using WFP’s service per week.” WFP, COVID-19, Level 3 Emergency, External Situation Report #12 (6 August 2020)(emphasis in original). The latest situation report is embedded below and reviews the wide array of services provided as well a review of some of the countries with acute needs. It also provides a link to contribute to the WFP.

WFP-0000118265

The External Situation Report indicates that there are 27 countries (based on an FAO-WFP hotspot analysis) which “are at risk of significant food security deterioration in the next six months”. (page 2). Countries at risk are Guatemala, Honduras, El Salvador, Nicaragua, Haiti, Peru, Ecuador, Colombia, Venezuela, Burkina Faso, Mali, the Niger, Sierra Leone, Liberia, Nigeria, Cameroon, Central African Republic, Democratic Republic of the Congo, Lebanon, Sudan, South Sudan, Mozambique, Zimbabwe, Somalia, Yemen, Ethiopia, Iraq, Syrian Arab Republic, Afghanistan and Bangladesh (total is 31, though Peru, Ecuador, Colombia appear to be at a lower level of risk based on coloration used on page 2). FAO – WFP early warning analsyis of acute food insecurity hotspots, https://docs.wfp.org/api/documents/WFP-0000117706/download/.

Where is the food aid?

For many countries, agricultural production has remained reasonably strong but large volumes of agricultural products have been destroyed based on lack of domestic markets, typically flowing from the collapse of the restaurant trade and the challenges in redirecting product, packaging and labeling into retail channels. See, e.g., New York Times, April 11, 2020, Dumped Milk, Smashed Eggs, Plowed Vegetables: Food Waste of the Pandemic, https://www.nytimes.com/2020/04/11/business/coronavirus-destroying-food.html.

At the same time, there have been huge increases in internal-country demand for help from food banks in some countries. See, e.g., for the United States: Feeding America, The first months of the food bank response to COVID, by the numbers, https://www.feedingamerica.org/hunger-blog/first-months-food-bank-response-covid-numbers.

It would seem that coordinated action by major agricultural goods producers in the WTO with the WFP and other groups should be able to provide large quantities of agricultural goods to those in need globally in the remaining months of 2020, goods which might otherwise simply be destroyed.

Similarly, while all countries are financially stretched during the pandemic, helping WFP obtain the needed financial resources to provide a coordinated pledging event should be of interest to WTO Members and many of the multilateral organizations working on COVID responses, as well as the business community and the general public.

While the WTO has grappled with limiting/eliminating export subsidies for agricultural goods, the WTO has always recognized the need to maintain the flow of humanitarian need particularly in agricultural goods. Consider these paragraphs from the 2015 Nairobi Ministerial Conference Decision on Export Competition (WT/MIN(15)45, WT/L/980 (21 Dec. 2015) at 6-7):

“International Food Aid

“22. Members reaffirm their commitment to maintain an adequate level of international food aid, to take account of the interests of food aid recipients and to ensure that the disciplines contained hereafter do not unintentionally impede the delivery of food aid provided to deal with emergency situations. To meet the objective of preventing or minimizing commercial displacement, Members shall ensure that international food aid
is provided in full conformity with the disciplines specified in paragraphs 23 to 32, thereby contributing to the objective of preventing commercial displacement.

“23. Members shall ensure that all international food aid is:

“a. needs-driven;

“b. in fully grant form;

“c. not tied directly or indirectly to commercial exports of agricultural products or other goods and services;

“d. not linked to the market development objectives of donor Members;
and that

“e. agricultural products provided as international food aid shall not be re-exported in any form, except where the agricultural products were not permitted entry into the recipient country, the agricultural products were determined inappropriate or no longer needed for the purpose for which they were received in the recipient country, or re-exportation is necessary for logistical reasons to expedite the provision of food aid for another country in an emergency situation. Any reexportation in accordance with this subparagraph shall be conducted in a manner that does not unduly impact established, functioning commercial markets of agricultural commodities in the countries to which the food aid is re-exported.

“24. The provision of food aid shall take into account local market conditions of the same or substitute products. Members shall refrain from providing in-kind international food aid in situations where this would be reasonably foreseen to cause an adverse effect on local13 or regional production of the same or substitute products. In addition, Members shall ensure that international food aid does not unduly impact established, functioning commercial markets of agricultural commodities.

“25. Where Members provide exclusively cash-based food aid, they are encouraged to continue to do so. Other Members are encouraged to provide cash-based or in-kind international food aid in emergency situations, protracted crises (as defined by the FAO14), or non-emergency development/capacity building food assistance environments where recipient countries or recognized international humanitarian/food entities, such as the United Nations, have requested food assistance.

“26. Members are also encouraged to seek to increasingly procure international food aid from local or regional sources to the extent possible, provided that the availability and prices of basic foodstuffs in these markets are not unduly compromised.

“27. Members shall monetize international food aid only where there is a demonstrable need for monetization for the purpose of transport and delivery of the food assistance, or the monetization of international food aid is used to redress short and/or long term food deficit requirements or insufficient agricultural production situations which give rise to chronic hunger and malnutrition in least-developed and net food-importing developing countries.15

“28. Local or regional market analysis shall be completed before monetization occurs for all monetized international food aid, including consideration of the recipient country’s nutritional needs, local United Nations Agencies’ market data and normal import and consumption levels of the commodity to be monetized, and consistent with Food Assistance Convention reporting. Independent third party commercial or non-profit
entities will be employed to monetize in-kind international food aid to ensure open market competition for the sale of in-kind international food aid.

“29. In employing these independent third party commercial or non-profit entities for the purposes of the preceding paragraph, Members shall ensure that such entities minimize or eliminate disruptions to the local or regional markets, which may include impacts on production, when international food aid is monetized. They shall ensure that the sale of commodities for food assistance purposes is conducted in a transparent, competitive and open process and through a public tender.16

“30. Members commit to allowing maximum flexibility to provide for all types of international food aid in order to maintain needed levels while making efforts to move toward more untied cash-based international food aid in accordance with the Food Assistance Convention.

“31. Members recognize the role of government in decision-making on international food aid in their jurisdictions. Members recognize that the government of a recipient country of international food aid can opt out of the usage of monetized international food aid.

“32. Members agree to review the provisions on international food aid contained in the preceding paragraphs within the regular Committee on Agriculture monitoring of the implementation of the Marrakesh Ministerial Decision of April 1994 on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-developed and net food-importing developing countries.

“13 The term ‘local’ may be understood to mean at the national or subnational level.

“14 FAO defines protracted crises as follows: ‘Protracted crises refer to situations in which a significant portion of a population is facing a heightened risk of death, disease, and breakdown of their livelihoods.’

“15 Belize, the Plurinational State of Bolivia, Ecuador, Fiji, Guatemala, Guyana, Nicaragua, Papua New Guinea and Suriname shall also have access to this provision.

“16 In the instance where it is not feasible to complete a sale through a public tender, a negotiated sale can be used.”

It is believed that the current WTO provisions on food aid should not pose hurdles to countries providing in kind aid where there are needed food products that can be exported during the pandemic. If that is not the case, then the WTO Members should agree to a temporary waiver of relevant restrictions to permit food aid during the pandemic.

There has been much discussion within the G20, WTO, WHO and other groups that collective action on the medical front is critical to see that medical goods, vaccines, are therapeutics are available equitably and at affordable prices. What one hasn’t seen is the same focus on ensuring that the world’ populations have access to food equitably and at affordable prices. During the pandemic, WTO Members have the opportunity to work together to see that food is not wasted and that food aid is supplemented to the extent possible to alleviate the unique challenges to food security presented by the COVID-19 pandemic.