The State of Agricultural Commodity Markets 2022


Sustainable development and the interplay between multilateralism and regionalism

Trade is an important instrument for promoting economic growth, but there is much more to trade integration than just promoting the exchange of goods between trade partners. Openness to food and agricultural trade can help countries ensure food security and better nutrition, achieve their objectives in the structural transformation of their economies, promote higher incomes and living standards in both rural and urban areas, and better manage their natural resources. Trade is not an end in itself, and there is no single prescription on how to leverage food and agricultural trade for sustainable development as countries differ widely.

However, embedding market-based incentives, competition and provisions to help safeguard the environment and labour rights in trade and agricultural policies is key to making them work for sustainable development. Complementary policies are also necessary to address potential trade-offs. For example, policies that facilitate access to modern inputs for smallholder farmers in developing countries and that upgrade their skillsets can improve their productivity and competitiveness.

Today, the path for trade integration appears to lead to large trade agreements that are regional, such as AfCFTA, or that link regions, such as RCEP. These large RTAs reduce tariffs. Some are deep in terms of encouraging the harmonization of non-tariff measures and facilitating trade, such as CPTPP, others in terms of harmonizing the rules of origin that constitute a high bureaucratic burden for firms, such as the RCEP. In other agreements, such as AfCFTA, details and protocols have still to be negotiated. The extent to which the food and agricultural sector is liberalized within such agreements also varies.

To use trade as a vehicle for sustainable growth, these RTAs have to be negotiated and managed in an inclusive manner. It is easier to achieve consensus between fewer like-minded countries than multilaterally, but an open and inclusive process with all relevant stakeholders within the negotiating countries, including environmental and labour advocates, when discussing specific provisions and standards can make trade agreements and trade work for sustainable development (see also Part 3).

At the same time, multilateral liberalization and harmonization of the rules of trade in food and agriculture increase the gains from trade compared with regional trade integration. Multilateral negotiations also allow for greater transparency and inclusivity at a global level. However, as countries have different needs in terms of promoting economic growth and different preferences towards the environment and social issues, global consensus towards trade policies may be difficult to achieve.

Although multilateral trade negotiations are deadlocked, the WTO offers a system that inter alia promotes discussion on border measures, contributes to reducing trade costs through trade facilitation and the harmonization of rules, while recognizing diversity in preferences and standards across countries. The WTO advances transparency, predictability and enforceability of trade rules and includes a mechanism to resolve trade disputes. Many of these mechanisms need to be reformed to address today’s challenges and to strengthen Issues such as the links between agriculture and the environment are already discussed in an informal context. The trade and environmental sustainability structured discussions (TESSD) in the WTO provide a venue to talk about how trade and trade policy can help to achieve environmental and climate

Together with regional trade integration, strong cooperation at the multilateral level is much needed. Global shocks to the food and agricultural markets, such as the COVID-19 pandemic, extreme weather events that affect harvests and food prices, and more recently, the war in Ukraine, need multilateral cooperation to ensure food security and better nutrition for all. In a world in which regional trade blocs cannot effectively address such challenges, multilateralism has a strong role to play.

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