CFS:2004/2-Rev.1

Table of Contents

I. INTRODUCTION

A. Current situation

B. 2004 cropping season outlook

II. MONITORING THE DIMENSIONS OF FOOD SECURITY

A. AVAILABILITY AND STABILITY OF SUPPLY

World Cereal Situation Indicators
Trends in the Availability of Food

B. access

C. STABility

Stability of consumption
Natural Hazards
Conflict
HIV/AIDS

III. SPECIAL ISSUE: TRADE

A. Agricultural Trade and Protection of Agriculture

Agricultural trade-distorting policies
Global trade policy reforms to improve food security

B. Measures to enable developing countries to take advantage of agricultural trade opportunities

IV. CONCLUSIONS AND RECOMMENDATIONS

I. INTRODUCTION

1. The UN’s Hunger Task Force¹ has estimated that on a global basis approximately 50 percent of the hungry are in farm households; 22 percent are the rural landless; 20 percent are urban; and 8 percent are directly dependent on natural resources. This finding reinforces FAO’s long-standing appeal for increased and stable investments in the agriculture and rural sectors. The fight against hunger must necessarily target the rural population in the developing countries.

2. Reducing hunger is critical to the attainment of the Millennium Development Goals (MDG) as good nutrition underpins progress towards each of the first six MDGs². The evidence suggests that reducing hunger reduces poverty by boosting productivity throughout the life cycle and across generations; that it leads to improved educational outcomes; that dealing with malnutrition typically empowers women; that malnutrition is associated with over 50% of all child mortality; that maternal malnutrition is a direct contributor to poor maternal health; and that good nutrition status slows the onset of AIDS in HIV-positive individuals, increases malarial survival rates and lowers the risk of diet-related chronic disease.

3. The current world food security situation is reviewed in this document within the context of the three main pillars of food security - availablility, access and stability. Trade is discussed as a special topic in view of its potential role in promoting food security in developing countries and in response to the request made by the Committee at the last Session.

A. CURRENT SITUATION

4. According to FAO estimates³ some 842 million people worldwide were undernourished in 1999-2001. This includes 10 million in industrialized countries, 34 million in countries in transition and 798 million in developing countries. After falling by 37 million during the first half of the 1990s, the number of hungry people in developing countries increased by 18 million in the second half of the decade. Recent available figures for countries in transition showed an overall increase of 9 millon between the period of 1993-95 to 1999-2001.

5. Regionally, only the Latin America and the Caribbean region has seen a decline in the number of hungry since the mid-1990s. Only 19 countries, including China, succeeded in reducing the number of undernourished throughout the 1990s by a total of 80 million. In 22 countries, including Bangladesh, Haiti and Mozambique, the number of undernourished declined during the second half of the decade.

6. In 17 other countries, however, the trend shifted in the opposite direction and the number of undernourished people, which had been falling, began to rise. In another 26 countries the number of undernourished people increased by 60 million during the same period.

7. The progress of countries and regions towards the attainment of the WFS goal of halving the number of hungry by 2015 is highly variable. Out of a total of 122 developing and in-transition countries, for which data exists, more than three fourths are either lagging behind or not on course to attain the goal. Table 1 summarizes the situation by region based on SOFI 2003 estimates of country performance in 1999-2001. Thirty-one countries are on track or achieved the WFS goal of halving the number of hungry people in relation to the 1990-92 base period. Twenty-seven countries are lagging or far behind. In 49 countries that are off-track, the hunger situation has actually worsened considerably.

Table 1: Performance of Countries in Reducing the Number of Hungry by Region⁴

B. 2004 CROPPING SEASON OUTLOOK⁵

8. FAO’s latest forecast of global cereal production in 2004 is 1 956 million tonnes, a substantial increase from the previous year. However, despite a modest expected rise in utilization, the new 2004/05 marketing season may lead to a fifth consecutive annual drawdown of global cereal stocks.

9. FAO’s first forecast of global cereal trade in 2004/05 stands at 229.7 million tonnes, 3 percent down from the previous year. The decline mostly reflects good crop prospects in traditional importing countries, as well as a strong production recovery in Europe. In the case of rice, trade is also expected to be limited by tight supplies in major exporting countries.

10. After rising for several months, international prices of most cereals eased back somewhat in recent weeks reflecting generally favourable prospects for the 2004 crops and, for rice, also the release of government stocks onto domestic markets in China and Thailand.

II. MONITORING THE DIMENSIONS OF FOOD SECURITY

A. AVAILABILITY AND STABILITY OF SUPPLY

World Cereal Situation Indicators

11. FAO monitors a selected number of indicators to measure changes in cereal markets given the prominent weight of cereals in the global food basket⁶. For the CFS, seven indicators are reported upon annually (as shown in Table 2):

The ratio of world cereal stocks to world cereal utilization. This indicator compares the global carryover stocks by the close of marketing seasons in 2005 to trend utilization in 2005/06. Based on the latest forecasts (as of May 2004), the ratio of global carryovers in 2005 to trend utilization in 2005/06 is expected to decline to around 18 percent. This compares to averages of 20 percent in

2003/04 and 31 percent in earlier years. Large draw down of stocks in China has contributed most to a declining trend in the stocks-to-use ratio in recent years. If China were to be excluded from world totals, the ratio would still decline, but the decrease would be less pronounced, from 14.7 percent to 14.2 percent. However, as shown in the chart, even without China, the ratio still dropped notably in 2002/03 and 2003/04. These reductions were principally driven by stocks decreases in India, the United States and several Commonwealth of Independent States (CIS) countries. This means that while reductions in cereal stocks in China have played a leading role in the overall drop in world stocks in recent years, those reductions did not mitigate the importance of falling inventories in other important cereal producing countries. In fact, the underlying reason for the surge in cereal prices during the 2003/04 season has been tighter supplies in those countries rather than in China.

• The ability of the five major grain exporting countries to meet the global demand for wheat and coarse grains imports. This indicator is the ratio of their supplies (i.e. a sum of production, opening stocks, and imports) to their normal market requirements (defined as the average of major exporters’ domestic utilization plus exports of the three preceding years). For the new marketing season, this ratio is forecast at 1.27, which implies that supplies in 2004/05 could exceed requirements by about 27 percent. This is a positive development following two seasons of exceptionally low levels. In 2002/03, the ratio was a low 1.09 but there was less of a concern then because of abundant export supplies in many emerging (non-traditional) grain exporting countries, including India, China and several CIS countries: those supplies compensated for reduced export availabilities in major exporting countries in 2002/03. However, grain supplies among non-traditional exporting countries also dried out significantly in 2003/04. The tightening of exportable availabilities has resulted in rapid increases in grain prices in 2003/04. Given a forecast recovery in 2004 production among the major exporting countries, grain prices are more likely to ease somewhat in 2004/05.
• The ratio of the major exporters’ ending stocks, by type of cereals, to their total disappearance (i.e. domestic consumption plus exports). For wheat, the ratio is forecast to decline slightly, to roughly 17 percent, mostly due to an anticipated reduction in wheat production in the United States. For coarse grains, the ratio is also forecast to drop, to around 9 percent, mostly driven by a continuing strong domestic utilization in the United States and larger exports from nearly all major exporting countries with the exception of Argentina. For rice, the indicator plunged from an already reduced level of about 38 percent in 2003/04 to roughly 36 percent because China is among the major rice exporting countries. In recent years, China has continued to draw on its inventories to meet domestic demand, whilst production has not kept pace with consumption.

Table 2: Selected Cereal Market Indicators

Notes:
Utilization is defined as the sum of food use, feed and other uses.
Cereals refer to wheat, coarse grains and rice; Grains refer to wheat and coarse grains.
Major Grain Exporters are Argentina, Australia, Canada, the EU, and the United States; Major Rice Exporters are China, Pakistan, Thailand, the United States, and Viet Nam.
Normal Market Requirements for major grain exporters are defined as the average of domestic utilization plus exports in the three preceding seasons.
Disappearance is defined as domestic utilization plus exports for any given season.
Price indices: The wheat price index has been constructed based on the IGC wheat price index, rebased to July/June 1997/98-1999/00 = 100; For maize, the U.S. maize No. 2 Yellow (delivered U.S. Gulf ports) with base July/June, 1997/98-1999/00 = 100; For rice, the FAO Rice Price Index, 1998-2000=100, is based on 16 rice export quotations. For 2003/04, the indices are calculated based on average selected prices from the beginning of the seasons up to May 2004. Rice index refers to the second year shown.

• Changes in world cereal production. In 2004 world cereal production is forecast to increase by 3.5 percent. This expansion should have a positive impact since world supplies are at relatively low levels and a strong increase in production this year can help to ease supplies.
• Changes in aggregate cereal production of the Low Income Food Deficit Countries (LIFDCs). This indicator provides another measure of food security in a group of countries considered most vulnerable to fluctuations in supplies. In 2004 aggregate LIFDC cereal production is expected to increase by about 2.2 percent compared to 2003, mostly on account of higher rice production in China and increased wheat and rice output in India.
• Changes in aggregate cereal production in LIFDCs, without China and India. In 2004 there was a small decline, around 0.3 percent, which compares to an increase of 8 percent in 2003. However, the decline comes after an exceptionally good year (2003) for LIFDCs when several countries benefited from bumper cereal harvests.
• Selected Cereal Price Indices. For wheat, the international Grain Council (IGC) wheat index is the reference measure (rebased to July/June 1997/98-1999/00=100). The IGC index is composed of a simple average of seven types of wheat (from Australia, Canada and the United States). Since the start of the 2003/04 marketing season (July 2003) and up to May 2004, the index points to a decline of over 1.8 percent compared to the corresponding period in 2002/03. It is important to note that even though wheat prices started to surge from October 2003, average prices during the first half of 2003/04 season were still below the corresponding period in 2002/03. Nonetheless, while this index could usually provide a relatively good indication of the overall trend in global wheat prices, it may not fully reflect price movements for all types and/or origins at all times. The EU wheat prices, for example, are not included in the composition of the index; thus, the prevailing tight situation in the EU, which resulted in a surge in the EU wheat prices are not properly captured by this index. For coarse grains, the US export maize price, which represents over 60 percent of world trade in maize and at least 45 percent of global trade in coarse grains, is used as a reference price for the calculation of the maize index (July/June 1997/98-1999/00=100). The increase of 6.4 percent follows a near 19 percent rise in 2002/03, which is indicative of the continuing tight maize situation. For rice, the FAO Export Price Index (1998–2000=100) points to a strong surge of nearly 38 percent when comparing the first 5 months of 2004 to the corresponding period in 2003. This reflects tight market conditions, which has lead to rice prices from nearly all categories (except for lower-quality Indica rice) to rise well beyond last year’s levels.

Trends in the Availability of Food

12. In overall terms, the availability of food in the developing regions has improved significantly over the last decade. As shown in Table 3 most regions have achieved, between 1990-92 and 1999-01, a steady annual growth in the number of kilocalories available per person. Asia and the Pacific enjoyed the most rapid growth followed by Latin America and the Caribbean. Even Sub-Saharan Africa recorded positive annual growth in the dietary energy supplies per capita in the same period. Whilst Chad, Ghana, Guinea and Namibia contributed to raising the Sub-Saharan Africa averages the Democratic Republic of Congo and Liberia experienced major declines in the availability of food. The Near East and North Africa as a region recorded a reduction in per capita food availability over the last decade, mainly due to conflicts in Afghanistan and Iraq. However it should be noted that this region still enjoys the highest per capita availability of food from amongst the developing regions. The in-transition countries have also experienced a reduction in their average food supplies per person, primarily due to the significant shortfalls in Kyrgyzstan, Moldova, Tajikistan and Uzbekistan.

Table 3: Trends in the Availability of Food in Developing Regions

Source: FAO, State of Food and Agriculture 2004.
*Figures for countries in transition relate to the period 1993-95 and 1999-01.

13. From amongst the developing regions Sub-Saharan Africa has the most serious deficits in the per capita availability of food. The poor quality of natural assets owned or used by most African farmers and lack of access to information and technologies that provide remunerative returns in the presence of such resource constraints are the overriding constraint to increased food production.

B. ACCESS

14. Rapid economic growth in the Asia Pacific region (see Table 4) has been responsible for a decrease in the number of people living in extreme poverty in developing countries as a whole. However, Africa, Latin America, Eastern Europe and Central Asia are still far from reaching the MDG of halving poverty levels by 2015. According to the World Bank, East and South Asia, particularly China and India, have lifted 500 million people out of extreme poverty — those living on less than US$1 a day — in 20 years⁷. Over that period, the population living in all developing countries on less than US$1 a day dropped from 1.5 billion to 1.1 billion.

Table 4: Poverty and Economic Growth as Access Indicators

Source: FAO, State of Food and Agriculture 2004 and World Bank, Millennium Development Goals (See http://www.developmentgoals.org/Poverty.htm). *No data.

15. Per contra, in sub-Saharan Africa, poverty rose from 41 percent in 1981 to 46 percent in 2001, while real GDP per capita decreased by 14 percent. Over the 20 years, 140 million people were added to the group living in extreme poverty. Meanwhile, people living on less than US$2 per day in Eastern Europe and Central Asia rose from 8 million in 1981 to more than 100 million in 1999, and dropped to 90 million in 2001. Poverty rates have declined in most regions, except for the transition economies of Europe and Central Asia and Sub-Saharan Africa. Most poor people live in South Asia, but the proportion of poor is highest in Sub-Saharan Africa.

16. The LIFDCs are most vulnerable to food insecurity on account of their low income and need to import food. From amongst this group the sub-group of LIFDCs that are highly dependent on a single agricultural commodity export display a high prevalence of undernourishment (36 percent)⁸. Poverty and food insecurity in these single commodity export dependent countries is both broad and deep. The dependency on a single agricultural commodity for export earnings creates a source of uncertainty because of the low income elasticity of demand and the declining and volatile terms of trade. The effects of primary commodity price instability are especially significant. The falling terms of trade reduce the country’s ability to finance investments, to spend on social programmes, and to import basic goods and services. Agriculture accounts for more than 70 percent of employment for this group of countries, so the falling commodity prices reduce agricultural incomes, increasing poverty in rural and urban areas. Small coffee producers in those countries highly dependent on coffee exports, for example, have faced more than a 50 percent price decline in nominal terms in recent years.

C. STABILITY

17. As of May 2004, the number of countries facing serious food shortages throughout the world stood at 35 with 24 in Africa, five each in Asia and Latin America, and one in Europe (See Box 1)⁹. The key factors that exacerbate hunger and vulnerability, are natural disasters, political strife, HIV/AIDS, and economic shocks.

18. The majority of the hunger spots in Africa - two thirds of the 24 African countries in need of emergency food supplies - are due primarily to conflict although HIV/AIDS is a major factor. The HIV/AIDS prevalence rates for the African countries facing food emergencies are indicated in parenthesis in Box 1. Only a quarter of the African emergency situations, including Kenya, Lesotho, Madagascar, Mauritania, Malawi, Mozambique and Swaziland, are purely attributable to weather..

19. In Asia and Near East, Afghanistan and Iraq are affected by conflict; the Democratic People’s Republic of Korea and Mongolia by economic difficulties and Sri Lanka by drought. Four of the five Latin American hunger hotspots are affected by adverse weather and economic shocks whilst Haiti has recently experienced civil strife, drought and floods.

Box 1: COUNTRIES FACING FOOD EMERGENCIES

(*Countries with an asterisk face unfavourable food outlook in 2004)

SOURCE: FAO/GIEWS – Foodcrops and Shortages, No 21, May 2004

20. FAO in cooperation with the World Food Programme (WFP) and the United Nations Relief and Works Agency (UNRWA) undertook an assessment of the food and nutrition situation in the West Bank and Gaza Strip (WBGS) February through July 2003¹⁰.The assessment concluded that though food is generally available, access is limited due to physical (curfews, closures) and economic reasons (high unemployment, depletion of resources, exhaustion of coping strategies and strained social support networks). The assessment confirmed the findings of other recent studies that households have until now been able to manage in the difficult circumstances albeit with dwindling resources and increased vulnerability to shocks. However, resilience has been greatly weakened, vulnerability increased and coping mechanisms severely strained by the rapid and inexorable decline in the economy and the continuation and further tightening of closures and curfews.

Stability of consumption

21. The stability measure¹¹, presented in Table 5, presents the probability of actual national consumption falling below 95 percent of trend during the 1980 to 2001 period by region. Consistent with other measures and indicators Sub-Saharan Africa displays the highest instability in consumption with a regional level average probability of a shortfall in consumption below 95 percent of trend of almost 20 percent. Ghana, Nigeria, Benin, Democratic Republic of Congo, The Republic of Congo, Somalia, Liberia, and Sao Tome all have frequencies in excess of 30 percent which made them extremely vulnerable to consumption shortfalls. Asia Pacific and the Latin America and the Caribbean regions have an average probability of 14 percent which is also relatively high.

Table 5: Stability of Consumption

Source: FAO, State of Food and Agriculture 2004.
*No data.

Natural Hazards

22. According to the UN’s Hunger Task Force, around 60 million people per year face hunger due to natural hazards having been escalated into disasters, or civil conflict. When natural hazards like droughts, floods and earthquakes escalate to disasters, they destroy household assets and jobs, undermine investments in agriculture and may push otherwise food-secure families into acute hunger. Disaster impacts may accumulate over time and most harshly affect economically weaker social groups.

23. While the single most serious natural hazard on a global scale is drought, Small Island States are particularly vulnerable to natural hazards such as cyclones, volcanic eruptions, earthquakes and climate extremes. Like all land-based systems in small island states and low-lying coastal areas, natural resources and livelihood systems are threatened in the long term by rising sea levels associated with global climate change^12.

Conflict

24. Conflict is one of the most common causes of food insecurity. The number and scale of conflict-related, food security emergencies is increasing, and the role of human-induced conflict in escalating a natural hazard, such as a drought, to a food security emergency has grown in importance over the last decade.

25. Violent conflict poses particular challenges to longer-term food security as it erodes the social fabric, breaks down or alters institutional and governance structures, and transforms the socio-political context for aid. Investing in agriculture for growth and food security will therefore require prevention and resolution of violent conflicts.

26. Conflicts make the identification of vulnerable populations and delivery of external relief very difficult and hazardous. Each complex emergency requires its own analysis and response. FAO is enhancing its capacity to diagnose emergency situations when they arise and as they develop given that conflicts are a growing cause of food insecurity.

HIV/AIDS

27. HIV/AIDS and malaria are the leading causes of adult morbidity and mortality in sub-Saharan Africa. The impact of HIV/AIDS is greater because the people most likely to be infected by the virus that causes AIDS are productive adults and by the time the symptoms of HIV/AIDS are manifest, the person with AIDS may well have infected several others. Africa is at the epicentre of the HIV/AIDS epidemic with over 25 million people (some 70 percent of the known global total) living with the disease. HIV/AIDS adult prevalence rates of 10 percent are common in many countries. Indeed, rates are above 15 percent and rising in countries like Botswana, Lesotho, Swaziland and Zimbabwe. The short-term effects on production and income are staggering in the labour-based economies of the poor. The spread of HIV/AIDS is eroding the capital base and undermining the productive capacity of many countries. HIV/AIDS has dramatically altered the landscape in which agriculture operates in southern and eastern Africa¹³.

28. HIV/AIDS, combined with other diseases, depletes human capital, agricultural production and productivity; it withdraws financial resources from economic activities in favour of health and funeral expenditures; it makes it financially impossible for agricultural households to intensify production through the use of labour-saving and capital intensive technologies; it reduces the ability for poor households to generate their usual income from casual labour; it restricts the access by households to economic services such as credit; and it reduces food security of extended families that take care of the orphans. In the long-term it may significantly hamper the sustainability of knowledge transmission and countries’ capacity to invest in agricultural growth and food security¹⁴.

29. The impact of HIV/AIDS is also gendered, placing a particular burden on women, the primary producers of food and the main caregivers. Data from Malawi reveal that 87 percent of households in which adult females have died are expected to experience a food gap, whereas only 38 percent of households in which an adult male has died can expect a gap.

III. SPECIAL ISSUE: TRADE

30. International adjustments in agricultural policies are critical to creating a global economic environment conducive to a sustainable and balanced growth of agricultural production, consumption and trade, and the availability and accessibility of food in all parts of the world, particularly in those suffering from hunger and malnutrition. The long-term objective of the trade reform process pursued in the current WTO negotiations on agriculture is, as indicated in the WTO Agreement on Agriculture, “to establish a fair and market-oriented trading system through a programme of fundamental reforms and encompassing strengthened rules and specific commitments on support and protection in order to correct and prevent restrictions and distortions in world agricultural markets”. WTO members launched the Doha Round in November 2001 to negotiate “substantial improvements in market access; reductions of, with a view of phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support.” Special and differential treatment enable developing countries to effectively take account of their development needs, including food security and rural development.

A. AGRICULTURAL TRADE AND PROTECTION OF AGRICULTURE

Agricultural trade-distorting policies

31. Although the Uruguay Round (UR) reforms have by and large brought agricultural trade-related policies under WTO disciplines, subsidies and protection remain high in the sector. OECD countries account for more than 90 percent of trade-distorting domestic support and export subsidies notified to the WTO. Since 1986-88, there have been few significant reductions in the producer support estimate (PSE) for various commodities in OECD countries; in total this support is US$257 billion in 2003. Most basic foodstuffs continue to be subject to significant trade-distorting support in the form of government subsidies and market price support underpinned by high and often complex forms of tariff protection. Tariff peaks as high as 300-500 percent affect some imports. More than 40 percent of agricultural tariff lines in the EU and US contain specific duties¹⁵. Tariff escalation (increase of tariffs by degree of processing) still persists in many commodity chains, limiting access for value-added and processed agricultural products. Tariff escalation is particularly pronounced in commodity sectors such as meat, sugar, fruit, coffee, cocoa, and hides and skins that are important to many of the poorest developing countries.

32. The available information on tariff revenue collection as a component of government revenue is reported regularly by the IMF. However, this information is not broken down by sectors (e.g. agriculture versus industrial products) or by country of origin of imports. Nevertheless, there are some estimates of the proportion of imports of agricultural and industrial products originating from developed, developing and least developed countries on which duties are levied by developed countries. Given the commitment of WTO members to the objective of “duty-free, quota free market access for Least Developed Countries (LDCs)”¹⁶, of particular interest would be the proportions of imports from these countries subject to import duties in major markets. The evidence for imports by developed countries of non-oil and non-arm products originating from LDCs indicates a wide range of policies, exemplified by the two major developed country markets. Under the European Union’s “Everything But Arms” initiative, 97 percent of imports from LDCs enter duty-free in their market, compared with only 14 percent of imports from LDCs that enter the US market duty free¹⁷. The corresponding proportion for other developed countries fall in between these bounds.

33. Agricultural subsidies in developed countries, such as those to meat, sugar, cotton, milk and rice have hindered the potential export growth of low-cost producers (many of them developing countries) in these products. Subsidies to cotton production in developed countries and its negative impacts on developing country producers have been the most recently publicised cases¹⁸.

Global trade policy reforms to improve food security

34. Although the food security problem of food insecure countries cannot be solved by trade policies alone, a reduction or elimination of trade-distorting policies can contribute considerably to establishing an enabling international environment. The current round of trade negotiations under the WTO (the Doha Round) has as an objective substantial trade-related policy reforms in the agricultural sector. However, the new rules and commitments as they apply to food insecure countries should not constrain their ability to realize their production potential, which is crucial for improving their food security. Furthermore, as current trends in the ratio of food imports to foreign exchange earnings for food insecure countries are far from sustainable, significant growth in their exports and expansion of domestic food production is needed. This can be facilitated through removal of supply side constraints and improved access to markets, including for value-added products. Finally, where policy biases exist against agriculture in food insecure countries, it is important that these be removed. For these reasons, there is much at stake related to market access conditions and domestic support in the ongoing WTO negotiations on agriculture for enhancing global food security.

B. MEASURES TO ENABLE DEVELOPING COUNTRIES TO TAKE ADVANTAGE OF AGRICULTURAL TRADE OPPORTUNITIES

35. Unfavourable market access conditions, restrictive market entry conditions, and supply-side difficulties¹⁹ are key obstacles that hinder the poorest developing countries from expanding and diversifying their agricultural exports to take advantage of trading opportunities. To take advantage of existing and potential trading opportunities and cope with changing market access and market entry conditions, major efforts are needed in the developing countries. These include policy reforms and investment in agriculture and rural areas to raise productivity and improve product quality and strengthen market infrastructure.

36. Market access conditions - Subsidies and protection to agriculture distort market signals and do not allow resources to be allocated efficiently in accordance with comparative advantage. As already noted the markets for temperate zone products and basic food commodities are substantially distorted. Tropical agricultural products, such as coffee, tea, natural fibres, tropical fruits and vegetables, face problems of high, complex and seasonal tariffs, and significant tariff escalation.

37. If all countries are to benefit from global trade, distortions to global agricultural markets due to government interventions must be reduced. Significant improvements in market access require substantial reduction or elimination of trade-distorting subsidies, and deep cuts in tariffs and tariff escalation. In so doing, there would be a need to take into account transitional problems likely to be faced by those countries, particularly low-income countries, whose trade is dependent on preferential access, and who would be adversely affected by a possible temporary rise in food prices.

38. Market entry conditions - Government barriers to trade are important; but as these are reduced other factors impede market entry, particularly those that spring from restrictive business practices, come to the forefront. Agricultural commodity chains, particularly for high value crops and processed products, are increasingly dominated by a few large transnational corporations and distribution companies. While these companies often represent increased investment and technology transfer the market entry conditions imposed by the large distribution networks can be a deterrent to small producers. These conditions generally relate to prices, speed of delivery, product characteristics (e.g. quality, appearance, cleanliness or taste) and safety.

39. To the extent that there is an abuse of market power by dominant agri-business firms that hinders producers and entrepreneurs of poor countries from gaining effective access to international markets, appropriate regulatory frameworks, including at the international level, may need to be devised to deal with the problem²⁰.

40. Supply-side constraints – Efforts to expand and diversify exports and domestic food supplies in developing countries generally face several supply-side constraints including high dependence on a limited number export commodities; weak human resource and technological capacity; inadequate legal and regulatory institutional and organizational framework; limited access of farmers and exporters to credit; and inadequate transport, storage, marketing and information infrastructure. An additional challenge is to meet the sanitary, phytosanitary and technical requirements of importing countries. It has been estimated that the cost of compliance with SPS-related obligations for some least developed countries could amount to as much as the total public development expenditure of the country²¹. To take another example, according to a World Bank study, a strict EU standard allowing only 4 ppb of total aflatoxins in cereals, dried fruits, and nuts for direct human consumption is estimated to decrease African exports of these products by 64 percent or US$ 670 million, in contrast to a less stringent 15 ppb total aflatoxins standard established by Codex Alimentarius.

41. Food safety – Since the conclusion of the Uruguay Round and the establishment in 1994 of the World Trade Organization, there has been a marked increase in the demand for FAO technical assistance and capacity building in the field of food safety for consumer protection and international food trade. In response to these requests, a large programme of capacity building activities, at global, regional and national levels, has been implemented involving relevant units in FAO Headquarters as well as in decentralized structures. These activities addressed a number of technical as well as policy and institutional issues of direct relevance to the actual needs and challenges of member countries such as advice on organization and management of food control systems; establishment of national Codex committees; implementing risk analysis principles in food safety work; advice on food legislation and its harmonization regionally and internationally; training of food inspectors and food analysts; upgrading food laboratory facilities; and guidance to food industry personnel and to farmers in the application of good manufacturing and good agricultural practices along the food chain.

42. FAO is collaborating with WHO, OIE, WTO and the World Bank in the implementation of the Standards and Trade Development Facility (STDF) which aims at exploring new technical and financial mechanisms to ensure effective capacity building and information exchange in the area of food safety, animal and plant health. The STDF partners are pursuing the creation of a multi-donor trust fund by the end of 2004, with a target size of US$4-5 million per year for the calendar years 2005-07. A number of guidance documents²² and tools have been issued recently to further assist Member countries to develop effective food safety systems.

IV. CONCLUSIONS AND RECOMMENDATIONS

43. There has been insufficient progress so far towards the World Food Summit target and the Millennium Development Goals relating to poverty and hunger. The recent increase in the number of undernourished people in the developing countries is a cause for alarm, especially in South Asia and Sub-Saharan Africa. Therefore, immediate action to intensify efforts to reduce food insecurity in these regions is a must.

44. The tightening grain market situation has serious implications for the urban poor, who constitute a growing group of the world’s hungry people and the rural net food purchasing households. However, the brighter prospects for food production in the current year are expected to ease the pressure on prices. Improvements in the international agricultural trade regime and rules could significantly enhance food security in developing countries.

45. While some progress is being made to create an enabling environment for the development of the agricultural economies of the poorer developing countries, there are still major gaps and a lack of coherence in policies, particularly in the areas of trade and aid. All policies should be formulated within a coherent framework so that liberalized market access conditions, including appropriate trade preferences, create real trading opportunities, food safety and quality standards that are scientifically justified, and ODA that is allocated according to sectoral priorities. In addition, promoting partnerships with the business sector, at all levels, is required in order to rebalance the international distribution of income, through actions to spur economic growth in, and to promote equitable trade between, poor and rich countries.

46. Given concerns in international development fora for the enhancement of the production capacity of poor developing countries some of the areas where greater coherence is needed include:

• Improved market access conditions for the exports of developing countries by removing tariffs, tariff escalation and non-tariff and technical barriers.
• Implementation of duty-free, quota-free market access for LDCs such as the Everything But Arms (EBA) scheme.
• Elimination of trade-distorting subsidies and other protectionist measures in developed countries.

47. The Committee may wish to consider adopting the following recommendations:

• Enhance the understanding of the causes of persistent hunger in Africa and South Asia with a view to identifying key components for hunger alleviation programmes in support of the attainment of WFS and MDG goals by the target date;
• Review the role of safety nets to protect the vulnerable from the vagaries of weather, conflicts, economic policies and economic trade-related shocks;
• Adjust food security policies and programmes to enhance resilience to HIV/AIDS - by incorporating HIV prevention, nutritional care for people living with HIV/AIDS and AIDS mitigation measures into food security and nutrition programmes to help reduce the spread and impact of HIV/AIDS; and
• Promote better preparedness and response to complex emergency situations through improving the quality and access to crucial food security information.

______________________________

¹ Interim Report of Task Force 2 on Hunger, Millennium Project, February 2004.

² Standing Committee on Nutrition (SCN), 5th Report on the World Nutrition Situation: Nutrition for Improved Development Outcomes, March 2004.

³ FAO, State of Food Insecurity, 2003.

⁴ The assessment of countries’ achievements is based on the following criteria: Achieved – the country has already achieved the 2015 target; On track – the country has attained the rate of progress needed to achieve the target by 2015 or has attained 90% of that progress rate; Lagging – the country has achieved 70-89% of the rate of progress required to achieve the target by 2015; Far behind – the country has achieved less than 70% of the required rate of progress; Off track – the performance of the country is less than 70% of the required rate of progress.

⁵ FAO, Food Outlook, No. 2, June 2004.

⁶ For most developing countries cereals provide the main source of dietary energy and thus constitute a good indicator for food security.

⁷ World Bank, World Development Indicators, 2004.

8 See, FAO, ESA Working Paper ESA/03-18:Food security and agriculture in the low income, food-deficit countries: 10 years after the Uruguay Round.

⁹ FAO/GIEWS – Foodcrops and Shortages, No21, May 2004. Figures in parenthesis against African countries are HIV/AIDS prevalence rates obtained from website://www.avert.org/statindx.htm.

¹⁰ Log on to http://www.fao.org/docrep/006/J1575E/J1575E00.HTM for the full report.

¹¹ See FAO, State of Food and Agriculture 2004, for the details of the method used for calculating the probability and Table A2 for individual country values. Following Sadoulet, E. and A. de Janvry (1995) Quantitative Development Policy Analysis, Baltimore, USA, Johns Hopkins University Press, the probability that national consumption falls below a certain percentage a (a = 95%) of its long-term trend is: Pr(C < aCt, where Ct is the estimated trend consumption. This probability can be estimated by historical data assuming that the error term ut is normally distributed around the regression line.

¹² Special Ministerial Conference on Agriculture in Small Island Developing States, Rome, 12 March 1999

¹³ http://www.fao.org/sd/dim_pe3/docs/pe3_040102d1_en.doc.

¹⁴ FANRPAN (2003) Identifying Policy Determinants of Food Security Response and Recovery in the SADC Region: The Case of the 2002 Food Emergency.

¹⁵ World Bank (2004), Global Economic Prospects 2004: Realising the Development Promise of the Doha Agenda, Washington D.C.

¹⁶ Paragraph 42 of the Doha Ministerial Declaration.

¹⁷ Bora, B. (2002), “Market Access Issues: what’s at stake”, WTO Public Symposium, Geneva, mimeo.

¹⁸ FAO (2003), SOFI 2003, FAO Rome.

¹⁹ In fact, a plethora of measures are needed at the domestic level to relieve domestic supply-side constraints. The most important of which are: the maintenance of a stable and predictable macroeconomic and political environment; establishing a fair and open regulatory framework; improving the efficiency of financial institutions, strengthening research and extension for developing and adopting relevant technology; improving rural services; upgrading the marketing, transport and communication infrastructure; and development of human resources.

²⁰ For example, some countries such as the United States have a long tradition of addressing this issue through anti-trust legislation and other measures. As large companies increasingly work across borders, and are truly global businesses, the WTO may contribute, through Agreements and disciplines, to ensure fair competition. This is an important area for consideration.

²¹ FAO (2003), SOFI 2003, FAO Rome.

²² Among these are : Assuring Food Safety and Quality – Guidelines for Strengthening National Food Control Systems (a joint FAO/WHO publication – FAO Food and Nutrition Paper No. 76 - 2003); Improving the Quality and Safety of Fresh Fruits and Vegetables – A Training Manual; Food Safety Management Systems for Small and Medium-scale Enterprises (a FAO publication under preparation - to be released in October 2004); Food Safety Risk Analysis – A Training Manual; Enhancing the Participation in the Work of Codex – A Training Pack (a joint FAO/WHO publication under preparation – to be released in November 2004); Assessment of Capacity Building Needs for Food Safety (A joint FAO/WHO publication, under preparation – to be released in September 2004).