The State of Agricultural Commodity Markets 2024

Part 2 TRADE AND NUTRITION: IDENTIFYING THE LINKAGES

How can trade affect nutrition?

Most economists would agree that, in general, trade increases welfare. Since the establishment of the WTO in 1995, trade has expanded significantly and recent research suggests that this resulted, on average, in largely positive but heterogeneous welfare effects.64 In countries that are open to trade, resources are allocated in line with comparative advantage, and this reduces production costs and increases efficiency. In the longer term, trade promotes technology and knowledge spillovers across countries. This increases growth by improving productivity and product quality and promoting innovation.65

In food and agriculture, gains from openness to trade can be larger than in other sectors. Comparative advantage in agriculture is shaped by technology and natural resource endowments such as land and water, of which there are significant differences across countries. Trade helps countries overcome their natural resource constraints and generate gains by importing food at lower prices from countries with abundant land and water, thus ensuring food security for their citizens.66

Nevertheless, openness to trade and its effects on society are contentious and subject to a heated debate between free trade proponents and critics of globalization. Indeed, gains from trade can be asymmetrically distributed, giving rise to inequality across and within countries.67 Trade openness affects the prices of goods and those of the factors of production, including labour wages, and thus can result in winners and losers. In agriculture, a major concern relates to the capacity of smallholder farmers in developing countries to compete globally in open markets but also to the linkages between trade, health and nutrition.68

Trade and health

Many researchers examine the impact of trade openness on an economy by studying health outcomes as an alternative measure of welfare. Improving people’s health and reducing health inequalities are central for achieving the Sustainable Development Goals (SDGs). A systematic review of trade’s health impacts points to a range of outcomes, including reduced child mortality, increased life expectancy, improved worker health and changes in the composition of food available for consumption that could affect dietary patterns and thus nutrition.69, 70

For example, analysts, using data from 80 emerging economies and developing countries between 1960 and 2010, found evidence that trade liberalization reduced infant mortality in approximately half the countries examined, while there was no significant impact for the remaining cases. This could be attributed to higher incomes and, more specifically, reduced taxation of agriculture that had a positive effect on farm incomes.71

In Africa, a policy allowing duty-free access to the United States by many sub-Saharan African countries – the African Growth and Opportunity Act that was enacted in 2000 – was found to reduce infant mortality in those sub-Saharan countries that exported large amounts of agricultural products and mineral ores to the United States, as compared with oil exporting countries.72 Increased employment in these labour-intensive sectors generated income and helped reduce infant mortality. Indeed, a greater decline in infant mortality was observed in families in which mothers were employed in agriculture and manual labour.

Most studies underline that incomes are the main pathway of trade impacts on health. However, this positive effect can be limited to specific population groups or sectors of the economy that benefit from increased trade, giving rise to income inequalities that could lead to multiple burdens of malnutrition (see Part 1).

Trade and nutrition

Trade in goods and services can affect nutrition through many direct and indirect channels and complex mechanisms. Trade is likely to be jointly determined with other economic and social drivers such as income, investment, education and lifestyle that also affect nutrition, making the identification of its effects in empirical assessments difficult. In fact, the exact mechanisms and impacts on different nutritional outcomes can vary by context and stage of development, but there has so far been only little empirical evidence on these relationships.73, 74

Some studies have attempted to disentangle the impacts of the economic, political and social dimensions of globalization on nutrition outcomes such as the prevalence of obesity or the average body mass index (BMI) – a measure of body fat based on height and weight. This body of empirical research provides mixed results (see Box 2.4). Some findings indicate that political and social globalization increases BMI by affecting lifestyles through information flows and societal influences. Expanding economic globalization, which includes trade in goods and services as well as foreign direct investment, is found to be associated either with higher or lower mean BMI or prevalence of obesity and overweight, depending on the specific nutrition outcome and the globalization index chosen by the analyst, the number of countries considered in the sample and the estimation methods.

BOX 2.4Globalization and nutrition outcomes: Empirical studies

A study analysing the effects of globalization and other variables across 190 countries during the 1980–2008 period suggests that domestic factors such as increasing gross domestic product (GDP) per capita and urbanization were associated with increases in the average body mass index (BMI) for men and women. While economic globalization did not predict any increases in mean BMI, income per capita was found to have a significant effect. Among low-income countries, higher GDP per capita was associated with increases in BMI. In high-income countries, this effect was reversed with increases in GDP per capita being associated with declining BMI, potentially pointing to reductions in the prevalence of overweight and obesity.106

On the contrary, in another study using a sample of 127 countries between 1980 and 2008, economic globalization was positively related to modest increases in the mean adult BMI.107 Several studies considered indicators different from BMI such as the prevalence of obesity or overweight. Economic globalization is often shown to have no effect or a decreasing effect on the prevalence of obesity or overweight. A study covering 56 countries between 1991 and 2009 found that globalization is substantially and significantly associated with an increase in the individual propensity to be overweight among women. However, this impact was found to be dominated by the political and social dimensions of globalization rather than the economic one.108 Another study across 180 countries finds that the economic and political dimensions of globalization reduce the prevalence of obesity among children and youth.109

Other dimensions of globalization such as improved communication and information flows can affect consumer preferences, dietary patterns and nutrition outcomes. Across the world, closer social integration, measured as an index of personal international contacts, international information flows and cultural proximity, was found to be positively associated with obesity.110, 111

Another study suggests that sociocultural aspects of globalization and access to information and communication technology reduce the share of overweight and obese young people aged between 15 and 19 years. This suggests that increased international interconnectivity within this age group could help promote knowledge about healthier eating and lifestyle habits.112

In a study on the effects of social globalization and trade openness on average BMI, increasing social globalization was associated with higher mean BMI and a higher availability of animal protein and sugar for consumption. These results were primarily influenced by specific components of social globalization such as information flows through television and the internet. Trade openness did not reveal any effect on dietary outcomes or health.113

Another strand of empirical studies explores the relationship between merchandise (all goods), trade openness and nutrition outcomes (see Box 2.5 for more details on nutritional outcomes). In Brazil, merchandise trade openness was shown to have a positive and significant impact on the prevalence of overweight and obesity between 1988 and 2008, suggesting that trade increased the availability of processed foods high in calories and other goods and services that could promote a more sedentary lifestyle.75

BOX 2.5GLOBAL NUTRITION TARGETS

On the occasion of the Sixty-fifth World Health Assembly (WHA) in 2012, national governments committed to six nutrition targets to be achieved by 2025: a 40 percent reduction of the global number of children under five who are stunted; a 50 percent reduction in the prevalence of anaemia in women of reproductive age; a 30 percent reduction in the prevalence of low birth weight; no increase in the incidence of childhood overweight; increase the rate of exclusive breastfeeding in the first six months up to at least 50 percent; and reduce and maintain childhood wasting to less than 5 percent everywhere. A seventh target, to halt the rise in adult obesity, was adopted by the WHA as part of the Global Action Plan for the Prevention and Control of Noncommunicable Diseases in 2013. Progress was made on most of the global nutrition targets, but this was mixed across indicators and the world is still not on track to achieve all of them. 

The prevalence of undernourishment is used to monitor hunger at the global and regional level, as well as Sustainable Development Goal (SDG) indicator 2.1.1. It is defined as the proportion of the population with a habitual food consumption insufficient to provide, on average, the amount of dietary energy required to maintain a normal, active and healthy life. The prevalence of adult overweight is also an important indicator of an individual’s overall health status. Overweight has increased rapidly across most countries and in all regions of the world. The global prevalence of overweight was estimated at 43 percent in 2022.

GLOBAL NUTRITION TARGETS

A table lists seven global nutrition targets, their definition and current status according to the latest data available.
SOURCES: FAO, IFAD, UNICEF, WFP & WHO. 2023. The State of Food Security and Nutrition in the World 2023: Urbanization, agrifood systems transformation and healthy diets across the rural–urban continuum. Rome, FAO. https://doi.org/10.4060/cc3017en; WHO. n.d. Global Targets 2025: To improve maternal, infant and young child nutrition. In: WHO. [Cited 30 April 2024]. https://www.who.int/teams/nutrition-and-food-safety/global-targets-2025

At the global level, a study across 175 countries during the 1975–2016 period, found that merchandise trade openness was positively associated with the prevalence of obesity, with a 10 percent increase in trade openness resulting in a 0.8 percent increase in the prevalence of obesity, on average.76

This impact was found to be strongest for lower-middle-income countries, followed by upper-middle-income countries and low-income countries, suggesting that income increases were the pathway of trade effects on nutrition. In fact, in another cross-country study, increasing merchandise trade openness was found to result in reduced rates of stunting, with the effect being transmitted, to a large part, through increased incomes.77

The importance of incomes as a pathway through which merchandise trade openness affects nutrition is also suggested by a study across 151 countries exploring trade effects on dietary energy supply adequacy, dietary diversity and quality-related aspects of food security between 1980 and 2007.78 On average, merchandise trade openness was found to have a positive and significant net impact on food security measured as dietary energy supply adequacy. Openness was also found to contribute to improved diets by expanding the availability of average animal source protein for consumption in each country, and by increasing income, resulting in stronger demand for animal source products.

The pathways of food trade effects on nutrition

Empirical evidence on the linkages between food trade and nutritional outcomes remains scarce, and, so far, only a handful of studies have explored these linkages more systematically.79 Agricultural and food trade constitute an important means of ensuring dietary diversity. As trade improves the availability and accessibility of foods that support a healthy diet as well as energy-dense foods high in fats, sugars and/or salt, it can have mixed effects on nutritional outcomes.80, 81

The linkages between trade and dietary patterns and resulting nutritional outcomes are intricate. Trade’s effects can be widely heterogeneous across countries both in direction and magnitude, depending on a country’s position on the development path, its structural characteristics and the national policy environment. This renders the relationship between trade and nutrition outcomes ambiguous and challenging to identify and measure empirically.

Focusing on the impact of food and agricultural trade policies also provides conflicting results. Trade liberalization has been identified as one of the key mechanisms through which trade impacts health and nutrition.82 Overall, the empirical literature appears to point to a broad association between trade liberalization, improved dietary quality and reduced undernutrition.83 Other studies suggest that trade, and in particular trade agreements, increase the availability of processed foods and lead to higher obesity rates.84, 85, 86 Recognizing the multitude of pathways and effects that food trade can have on nutrition, it may be necessary to take a narrow focus on the trade of specific food categories and their linkages with nutritional outcomes. Nevertheless, many pathways through which trade affects nutrition can be conceptualized. However, most of these effects are endogenous, occurring simultaneously and reinforcing each other, making it difficult to identify causal relationships. An econometric exercise carried out for this report attempts to distinguish the individual effects of trade openness and income on selected nutritional indicators (see Box 2.6).

BOX 2.6Estimating the average impact of food trade openness on selected nutritional indicators

A simple correlation between a nutritional indicator, say, the prevalence of obesity, and openness to food trade, would not necessarily reveal the underlying average causal effect. Food trade openness could affect obesity through several pathways, including income. At the same time, openness to food trade and incomes can be simultaneously determined, although both can affect obesity independently. For example, openness to food trade can facilitate structural transformation and income growth by increasing the availability of and access to food in a country. Such an analysis requires a modelling framework that can separate the effect of trade openness from the income effect.

Using data on the prevalence of obesity among adults and the prevalence of stunting in children under five years of age, a modelling exercise undertaken for this report identified and estimated the separate effects of food trade openness and gross domestic product (GDP) per capita across countries. To accommodate the heterogeneity in impacts, as the effects of trade openness and income are likely to differ across countries at different levels of development, the modelling framework provides estimates along the distribution of the nutrition outcomes, that is for lower values of obesity and stunting (the 10th percentile of the distribution), the median values (the 50th percentile) and higher values (the 90th percentile). For example, high values of obesity are, in general, found in middle- and high-income countries, while high values of stunting are prevalent in low-income countries.

The estimated impacts support the concept of nutrition transition. Income growth is a major driver of the nutrition transition and the effects of GDP per capita on obesity and stunting are always stronger than the impact of trade openness. Higher incomes result in lower rates of stunting and higher rates of obesity. These effects are strongest for rapidly developing middle-income countries with low to medium levels of stunting and obesity (Figure 2.12).

FIGURE 2.12Average impacts of food trade openness and gross domestic product per capita on the prevalence of obesity among adults and the prevalence of stunting in children

Box plots show that trade openness is estimated to reduce the prevalence of stunting in children. It may be related to increasing rates of obesity in countries that have a high prevalence of obesity. Income is estimated to reduce the prevalence of stunting and raise the prevalence of obesity.
NOTES: The figure shows estimated effects of trade openness and gross domestic product (GDP) per capita on the prevalence of obesity in the adult population and the prevalence of stunting in children under five years. Effects are estimated for lower levels, median, and higher levels of obesity and stunting. Shaded areas denote confidence intervals of the estimates. Trade openness is defined as the ratio of food and agricultural trade over the size of the food and agricultural sector in a country. Prevalence of obesity is defined as the percentage of adults whose body mass index (BMI) is equal to or greater than 30 kg/m2. Prevalence of stunting is defined as the percentage of children under five years of age with a height-for-age less than −2 standard deviations below the World Health Organization (WHO) Child Growth Standards median.

SOURCE: Adapted from Engemann, H., Jafari, Y. & Zimmermann, A. (forthcoming). Diversity of food supply across countries and the impact of international trade – Technical note for The State of Agricultural Commodity Markets 2024. Rome, FAO.

Trade in food is important for food security and nutrition. Food trade openness is shown to reduce stunting at all levels of development, as more trade increases the availability and diversity of food (see Part 3). The effects are weakest in countries with high levels of stunting, which are typically observed in low-income countries, potentially because these countries are not well integrated into global food markets and do not trade intensively.

Trade openness is relatively clearly associated with an increasing prevalence of obesity only at very high levels of obesity. The highest levels of obesity are found in many Small Island Developing States including the Pacific islands and countries in Northern Africa and Western Asia (see Part 4). Due to land, water and other resource constraints that affect their food and agricultural production capacity, these countries are highly dependent on food imports to feed their populations and they trade a lot (Figure 2.2).

In these cases, where domestic production capacity is limited, food trade can be directly related to increasing rates of obesity. In countries with low to medium levels of obesity, the effect of food trade openness on obesity rates is not significantly different from zero.

Availability and access to food

Food trade allows for more food imports and thus increases the availability of foods for consumption in a country. This helps overcome the constraints that the uneven distribution of natural resource endowments poses on the supply of foods and nutrients across countries. With higher availability, domestic food prices decline, making food more accessible. Higher availability and lower prices can impact total food consumption and dietary composition, thus affecting nutrition outcomes at individual and population levels (see Part 3).87 At the same time, trade can increase the availability of ultra-processed foods of high energy density and that are high in fats, sugars and/or salt, thus shaping dietary patterns associated with overweight and obesity (see Part 4).

Food diversity

Greater openness to food trade also allows for a greater variety of food imports and a more diversified food supply. Global markets enable the exchange of foods that are produced under specific climates, soil and other natural conditions and, thus, contribute to the diversity of diets, which could improve nutritional outcomes (see Part 3).88 Food trade was found to promote a healthier and more balanced diet, as countries have access to an increased variety of foods and an adequate supply of macro and micronutrients.89

Stability of food supply

Food trade openness also allows for seasonal adjustments in food imports, enabling a more stable food supply in terms of both quantity and diversity throughout the year or in the event of shocks such as weather extremes that affect production. Trade is, therefore, a potentially powerful mechanism to even out supply fluctuations and to reduce price volatility in a country. Stability in food supply and food prices addresses short-term nutrition outcomes such as child wasting. Recent analysis suggests that, on average in middle- and low-income countries, a 5 percent increase in the real price of food increases the risk of wasting by 9 percent and severe wasting by 14 percent. These risks apply to young infants, as well as to older children who typically experience a deterioration in diet quality in the wake of food price increases.90

Income growth

More indirect channels in which trade affects nutrition are through its effects on the wider economy. Opening to food trade can spur economic growth in a country, accelerating the process of structural transformation. Trade in food, especially imports, can help meet domestic food requirements without keeping a large labour force in agriculture. Food imports allow the workforce initially bound in agriculture to be freed-up and to migrate to more productive non-farm sectors, thus further accelerating growth.91 Analysing the process of structural transformation in the Republic of Korea, a study finds that agricultural imports played a crucial role in the development of the economy.92

The effects of increasing incomes on food intake and nutrition are well-researched. Increasing incomes can improve access to food and result in a shift from the consumption of a high share of staple foods to more diverse dietary patterns, including meat and fish, milk, eggs, fruits and vegetables, and fats and oils (see Part 1). This shift can improve the nutrient adequacy of diets but can also result in a higher consumption of ultra-processed foods high in fats, sugars and/or salt, which can contribute to an increased prevalence of overweight and obesity (see Part 4).

At the same time, trade openness, either by intensifying competition or by fuelling the structural transformation process, can also affect income distribution and inequality with negative implications for food security and nutrition. A study suggests that, depending on initial income levels, size and competitiveness of the food and agricultural sector in a country, food trade openness may increase the prevalence of undernourishment as farmers experience a decline in incomes due to lower prices, counterbalancing any nutrition gains in the non-farm sectors of the economy.93

Consumer habit formation

Trade can also affect eating habits by transferring foods and flavours between countries.94 An increased availability of imported foods can shift consumer preferences and tastes towards them, sustaining their consumption. For example, an analysis focusing on the reunification of Germany suggests that the introduction of a wide range of foods to East Germans changed their eating habits, resulting in a shift in dietary patterns that could explain increases in the prevalence of overweight and obesity.95

back to top TOP