What Are the Benefits and the Costs of Global Trade in Food Products - Essay Example

? What are the benefits and the costs of global trade in food products? Introduction The global trade in food has continued for millennia; however, what is different today is the place, the extent and who controls the global trade in food products. In recent times, there has been immense growth in the global trade with a projected three-fold increase between 1965 and 1999. This growth has come against the backdrop of rising concerns over the sustainability of the present model, especially with regard to food security. The recorded growth has been compounded by the growth of free market economics, and the rise of trade agreements such as World Trade Organization’s Agreement on Agreement, and the European Union’s single market policy, as well as institutions that have promoted liberalization of global trade. Most governments appreciate that a strong national food industry is a critical supplier of food to the population and view food exports as a critical part of maintaining balance of payments and gaining foreign exchange (Jermy, 2012). The growth of global trade in food products can be attributed to several factors. First, the arena of food microbiology, food technology, and food chemistry are perpetually availing an expanded range of foods by developing innovative and more refined preservation, packaging, and processing techniques that render food safer, less perishable, and highly attractive to the consumer (Aksoy and Beghin 2005, p.37). Secondly, the advanced transportation systems, industrialization of agriculture, emergence of dominant transnational corporations, and enhanced handling methods have minimized the length of time and difficulties linked to transporting food for long distances, hence allowing traders access to fresh and far-away markets. Thirdly, the consumer tastes and food habits have become more diverse, and their incomes and purchasing power has risen, invigorating the demand for conventional and new foods from other regions (Ingco and winters 2008, p.252). The notion of whether a country is a net food importer or exporter hinges on a number of factors such as local conditions for food manufacturing, agricultural production, costs and demands for both domestic or foreign food products, as well as participations in economic activities that avail other sources of income. The Benefits of Global Trade in Food Products The benefits derived from the global trade in food products can be summarized as enhancing the domestic competitiveness, sustaining cost competitiveness within the domestic market, minimizing dependence for food supply on existing markets, stabilizing seasonal market fluctuations of food supply, and propelling gains in the global market share for food products. The increased supplies of global food products emanating from the liberalization of yields lower domestic prices for consumers, in the same way that the added demand for the international market will result in higher prices and additional jobs for the producers of the food products, especially within developing countries (Cline 2004, p.134). Undoubtedly, the global trade in food products has led to cheaper and more plentiful agricultural produce, which, in turn, has had a spill over benefits to the overall health of societies. The global trade in food products promotes maximum utilization of resources/efficiency (especially surplus produce) and minimizes trade fluctuations. The global marketplace for food products manifests large supplies and an extensive demand, which helps to stabilize food prices (Brewster Kneen 2002, p.100). The global trade in food products also promotes international trade, thus fostering peace, mutual understanding, and goodwill among nations. The interdependence between countries yields a close cultural relationship between countries. The global trade in food products accounts for a significant part of a country’s gross domestic product. Similarly, the global food products trade is also a significant source of revenue for a majority of developing countries. The benefits derived from global trade in food products have been a significant driver of economic growth (Boue?t 2008, p.29). The fundamental motive for the global trade in food products is to sell food surplus, and buy food products that are either in short supply or needed to create a variety. The global trade in food products creates jobs, attracts investments in food production and manufacturing, attracts fresh technology and materials, and avails individuals (and countries at large) with a wider choice of food products. Satisfying People’s Needs The global trade in food products significantly aids to meet people’s needs driven by the observation that, frequently, many countries generate surplus food more that citizens can consume. Similarly, some countries may not be able to produce certain food products such as fruits; hence, such food products must be imported. However, a significant number of individuals prefer to buy locally grown food for multiple reasons such as nutritional, economic, and environmental, some of which may overlap (Organisation for Economic Co-operation and Development 2000, p.249). The nutritional arguments hinge on the disparities between produce that can be readily eaten while fresh. This assertion flows from the observation that some fruits and vegetables vitamin content is reduced by light, temperature, and time, which makes imported produce to possess lower levels of such nutrients. Job Creation Global trade in food products is a critical source of jobs whether in food production, processing, packaging, or transportation of food products. When a country buys food products from another, it creates jobs in the country of origin. The exportation of food products is a significant source of employment opportunities. In cases where the global trade of food products is balanced, agri-businesses remain profitable, which is a critical impetus for growth (Defra 2008, p.2). The global trade in food products attracts investments within the food industry, which in turn, creates jobs. The international trade of food products is a significant driver of new technology and materials as the agri-businesses seek to attain competitiveness and profitability. Every country pursues to produce competitive food products for both national and international markets. In turn, the country is able make significant strides in the arena of food production, food safety, biotechnology, among other fields. Diverse Food Products Global trade in food products turns the world into a giant market where countries can deliver food and purchase with minimal restrictions. Food stuffs that were previously considered as a rare are widely available at the local grocery stores thanks to the global trade for food products. Since agri-businesses compete at the global level, this guarantees better quality food products at lower prices (Errington and Nolan 1997, p.634). Although the benefits to consumers from lower food prices may seem to be exaggerated, especially to the degree that such prices avail health benefits, it is probable that global trade in food products avails consumers with a broad variety of lower priced nutritious foods such as fruits and vegetables. Costs (Disadvantages) of Global Trade in Food Products The global trade in food products has presented enormous benefits; however, this has been attained at an equally high cost. Global trade in food products may lead to exhaustion of resources as countries strive to satisfy global food demand (law of diminishing returns). Other disadvantages include overspecialization in food production, over-dependence on other countries for food supplies, and unequal distribution of gains from trade (Martyn 2004, p.374). This, in turn, may threaten the food security of many countries. The lowering of food prices by the global trade in food products has also presented its own disadvantages. The flooding of the world market with low priced agricultural produce renders the prices within the national, regional, and local markets to fall. When prices are low, production does not necessarily decline significantly, but farmland stays in production with farmers employing more intensive farming practices to enhance output and compensate for the lower prices (Defra 2010, p.64). The restructured global trade in food products enhances competition among farmers for the limited markets, which, in turn, reduces food prices and overall farmers’ profits. Similarly, the arrangement propels corporate concentration, minimizes competition among agribusiness corporations and enhances their profits (Errington and Nolan 1997, p.635). It thus follows that the principal beneficiaries of global trade in food products are the multinational corporations who, overtime, have mastered the art of reaping the economic benefits of trade liberalization and the global trade in food products while simultaneously transferring the economic, social, and environmental costs onto farmers and the general public. It is often argued that global trade in food products can render countries to be prosperous in the short term, but also suffer economic exploitation. The global trade in food products has sometimes been blamed for supporting non-democratic systems. In such cases, the entities involved have been accused of making poor decisions regarding land use or surplus production for export to the detriment of the general population’s welfare. For instance, most landowners in Nicaragua and El Salvador compel farmers to grow coffee beans since it is a highly profitable cash crop, but the farmers would want to utilize the land to grow more food for their families’ consumption. Moreover, the benefits of developing countries from increased exports in food produce have yielded mixed results. Increased market access for developing remains frequently condemned for leading to a narrow focus on the production of limited variety of crops. Such mono-cropping can yield unsustainable growth, leaving the countries to be susceptible to price variability within the international markets (Jeremy, 2012). Similarly, the need to maintain competitiveness within the global trade in food products has led to some businesses failing to comply with the set laws and regulations on environmental issues (Martyn 2004, p.375). Major global food production and exporting companies have contributed significantly in environmental degradation (of water, air, and land), especially in countries that manifest weak environmental regulation (Sophia 2002, p.3). This has led to the intensive utilization of synthetic inputs such as (pesticides and fertilizers), machinery, large scale factory farming, crop monocultures, and long-distance transportation of food products, all of which contribute to environmental degradation. Proponents of buying local produce, rather than within the global market are mainly concerned with the environmental impact of contemporary agriculture and transportation. The advocates of buying local produce asset that by minimizing “food miles,” this can minimize environmental damage as extensive food transportation increase the amount of fossil fuels burnt, which subsequently to environmental pollution, and, ultimately, climate change. Although, the international trade of food products has made significant steps towards self regulation, the global food industry and food production has also fallen into some pitfalls associated with unregulated markets. Some food traders have resulted to some unfair practices of exploiting consumers via irregular practices associated with pricing, misleading labelling, and misrepresentation of products. Such cases have invited government involvement, and subsequent enactment of food laws and regulations, as well as the establishment of food control agencies to guarantee compliance with set standards (Sophia 2002, p.2). However, the variations of the national food control systems encompassing monitoring and sampling, detection and analytical techniques, employment of standards and food safety requirements have given rise to trade restrictions or non-tariff barriers to trade. The rise of Multinational Corporations In removing trade barriers (tariffs, quotas, and duties), trade liberalization has yielded a solitary, hyper-competitive, market in which the world’s one billion farmers are compelled to sell their produce few food corporations. Similarly, in erasing borders and globalizing markets, trade agreements have facilitated and encouraged the dominant multinational corporations to grow via mergers and acquisitions of other corporations. This disturbance in the balance of power is a critical reason for the disparity of distribution of profits witnessed in the global food market (Sophia 2002, p.2). The Mirage of Benefits from Global Trade in Food Products One of the overriding questions that can be asked with regard to global trade in food products is who benefits from trade liberalization of food products. It is apparent that it is not the average worker or consumer, or farmer, but rather those who control goods and services-the production, distribution, and sales of food products within the global market. These are essentially multinational corporations that have overtime gained control over all the global trade of goods and services. The global trade in food products and increased trade liberalization are that the move will herald access to rich-country markets, and hence, accelerate economic growth within developing countries. Nevertheless, all pointers suggest the contrary; the envisaged benefits of trade liberalization such as enhanced share of export markets have not been attained, with a market share of world agricultural exports remaining comparatively constant (Oxfam International 2002, p.2). A United Nations Report that explored 48 least developed countries indicated that, although, those countries have undertaken significant measures to liberalize their markets, the countries have been pushed further into poverty (UNCTAD 2000, P.3). Developing countries have largely been unable to gain increased access to global markets; instead, the countries the countries have been increasing their food import bills. Small farmers in developing countries, either, have not reaped the promised benefits of global trade in food products since, frequently, the global trade in food products mainly favours larger farms, mechanisation, and monocultures. In essence, globalization and liberalization of agricultural trade can be regarded as threatening the survival of farmers who cannot deliver critical technology for rigorous, large-scale farming (Great Britain 2006, p.124). Similarly, the global trading of food requires farmers to strive for internationally competitiveness so as to survive competition with farmers from other countries where climate and geography may be more favourable, labour costs may be lower, and where environmental and animal welfare standards may be less rigorous. As a result, crops that could be farmed locally can now be imported, usually at prices that are well below the local cost of production. This, in turn, dents farmer’s livelihoods and undermines local economies (Defra 2010, p.65). Multinational food corporations presently do not have any allegiance to any community as they crisscross economies, to spotlight the lowest price. The multinational corporations exploit their global scope, free trade liberalization, and their political influence to play farmers against each other and since farmers cannot relocate their farms, the farmers are forced to lower their prices, often lower to the cost of production so as to win contracts. According to De Schutter, it is evident that the current international trade system governed through the agreements arrived at the WTO (at both regional and bilateral levels) maintains the advantages for developed countries and curtails the expansion of benefits for developing countries (2009, p.4). It is no doubt that farming and land management has a significant role to play in Britain’s future. This is in cognizance of the fact that the industry is the provider of the bulk of food consumed in the country, besides managing the landscape. The decline experience in food production (meat dairy, and vegetables) and subsequent dependence on food imports that the country can grow itself is a worrying trend. Notably, this trend can be considered to be strategically undesirable as countries attempt to counter climate change that is speedily reducing the world’s productive capacity amid a projected skyrocketing of the global demand for food (Conservatives, 2010). The fall witnessed in domestic food production contributes to weakening of food security, besides threatening the viability of rural communities. This is a direct affront on thousands of jobs that are based in food manufacturing industry. Undeniably, food processing industry depends directly on UK farming, and if the trend of substitution of domestic food production with net food importation, then, this will put the jobs and investments in food production and manufacturing at risk. The aspect of trade liberalization and globalization should not be disregarded either; hence, it is essential to facilitate farmers to enable them to compete openly and fairly with farmers from other countries (Hamer, 2012). The sure way to attain this is to enhance the environment and sustain the attractiveness of the countryside, which shapes the backbone of food production. Meeting the growing demand of food devoid of degradation of the environment should be the focus of every government that pursues to satisfy the global demand for food products. The core focus, in this case, should hinge on promotion of fair competition, minimization of regulations that weigh down food production activities, and enhance production and stability of food production devoid of environmental degradation (Conservatives, 2010). Conclusion The global trade in food products has grown astronomically as countries count on each other to secure a sufficient and varied food supply via the import and export of food products. Essentially, it can be argued that the global trade in food products represents a “race to the bottom” as corporations search for the cheapest labour and resources, lowest taxation, externalized risks, and weakest regulations. Often, the lower prices that the farmers are paid for their produce have not translated into reduced prices for consumers. The gains made have largely been absorbed by food corporations within the manufacturing and marketing of food produce mainly to boost corporate profits, and settle their overhead costs-processing, transport, packaging, and advertising. This is not to mean that farmers cannot benefit from global trade in food products, but, in practice, they have not. As demonstrated, the global trade in food products has done little to alleviate food security and its benefits have largely leaned towards developed countries, the centre of majority of the multinational corporations. The core focus should hinge on producing food for, first local consumption, rather than strictly for export. References List Aksoy, M. A., & Beghin, J. C. (2005). Global agricultural trade and developing countries, Washington, World Bank. pp.37-45. Boue?t, A. (2008). The expected benefits of trade liberalization for world income and development: opening the "black box" of global trade modeling, Washington, D.C., International Food Policy Research Institute. pp.29-30. Brewster Kneen (2002). Invisible Giant: Cargill and its transnational strategies, 2nd Ed, London, Pluto Press. pp.100-102. Cline, W. R. (2004). Trade policy and global poverty, Washington, Institute for International Economics. pp.134. Conservatives (2010). Anew age of agriculture: Our agenda for British Farming [Online]. Available at: [Accessed 20 December 2012] Martyn, W. (2004). Farmers online: drivers and impediments in adoption of Internet in UK agricultural businesses, Journal of Small Business and Enterprise Development 11 (3). pp.371 - 381 Organisation for Economic Co-operation and Development (2000). The agro-food processing sector in China developments and policy challenges, Paris, Organization for Economic Co-operation and Development. pp.249-250. Oxfam International (2002). Rigged Rules and Double Standards: trade, globalization and the fight against poverty, Oxford, Oxfam. pp.1-2. Sophia, M. (2002). Managing the Invisible Hand: Markets, Farmers and International Trade, Minneapolis, Institute for Agriculture and Trade Policy. pp.2-8. UNCTAD (2000). Least Developed Countries Report 2000, New York, UNCTAD. pp.3-4. Read More