Trade is integral to our agrifood systems as it fulfils the fundamental function of moving food from surplus to deficit regions, thus contributing to food security globally. Global food markets connect people and countries across the globe, contribute to efficient natural resources use worldwide, facilitate the supply of sufficient, safe and diverse food and generate income for farmers and those employed in the food and agricultural sectors. Trade is inherent to the economic, social and environmental dimensions of sustainable development. It is closely related to economic growth, it interacts with people and links with the environment.
Since the beginning of the twenty-first century, globalization and trade increased significantly. Food and agricultural trade nearly quintupled, rising from USD 400 billion in 2000 to USD 1.9 trillion in 2022. Food trade made up around 85 percent of all trade in food and agriculture. The energy it carried more than doubled between 2000 and 2021, reaching almost 5 000 trillion kilocalories in 2021. Adjusted for global population growth, food trade increased from 930 kcal per capita per day in 2000 to 1 640 kcal per capita per day in 2021.
This expansion in global food trade has been influenced by the establishment of the World Trade Organization (WTO) in 1995. WTO’s multilateral trade rules have shaped a freer, fairer and more predictable trade environment, which, together with an increasing number of regional trade agreements, have promoted food and agricultural trade and economic growth.
Nevertheless, the rapid globalization of food markets has raised concerns about the potential impacts of progressively increasing food trade on societies. Food production for exports is seen as contributing to the depletion of natural resources. Trade could widen inequality, especially in countries where the agricultural sector is made up of a large number of resource-poor farmers who cannot compete globally. More exposure to global food markets could result in an increased availability of energy-dense foods with low nutritional value relative to nutritious foods, which could contribute towards unhealthy or poor diets, worsening nutritional outcomes.
The 2024 edition of The State of Agricultural Commodity Markets (SOCO 2024) explores the complex linkages between food trade and nutrition and generates evidence to identify how trade affects dietary patterns and nutritional outcomes. The report examines the intersection of trade policies and nutrition measures and provides policymakers with an understanding of how to address nutrition objectives in the changing landscape of global agrifood systems.
Development and the nutrition transition
Placing the trade–nutrition nexus in the broader context of development shows how dietary patterns change because of economic, social and demographic dynamics. Economies develop through a process of structural transformation in which agriculture can play a key role. Economic growth is fuelled by a reallocation of economic activities from agriculture to other more productive sectors such as manufacturing and services. The structural transformation of the economies entails rising incomes, urbanization, deeper integration into global markets, the rise of modern industry and services, and lifestyle changes.
Along the development path, income growth, urbanization, globalization and changes in employment are interrelated, occur simultaneously and reinforce each other. All affect food consumption and the composition of diets, giving rise to a nutrition transition.
Income growth is a major driver of the nutrition transition. As incomes rise, dietary patterns shift from being predominantly composed of staple foods to becoming more diverse with people consuming more meat and fish, milk and dairy products, eggs, fruits and vegetables. Together with the shift towards more diverse dietary patterns, the consumption of processed and ultra-processed foods high in fats, sugars and/or salt increases, contributing to the prevalence of overweight and obesity.
At the same time, as urbanization progresses, more women and men work outside the household and spend more time commuting to their jobs. This can affect food preparation in the household, driving the purchase of pre-prepared or ready-to-eat foods and to more food being consumed away from home. Since the 1980s, the transformation of the food processing industry and food retail sector has been a major factor in facilitating the nutrition transition in developing countries and emerging economies.
The nutrition transition is reflected by a decline in the prevalence of undernourishment and stunting in children under five years of age and an upward trend in the prevalence of overweight and obesity.
The prevalence of undernourishment in the world declined significantly from 12.7 percent to 9.2 percent between 2000 and 2022. In this same period, the prevalence of obesity in the adult population increased from 8.7 percent in 2000 to 15.8 percent in 2022 globally. In some high- and middle-income countries, over one-third of the adult population is obese. Overweight and obesity are increasing rapidly in countries that have not yet been able to eradicate the various forms of undernutrition, giving rise to multiple burdens of malnutrition.
Trade impacts on nutrition
The linkages between trade and dietary patterns and resulting nutritional outcomes are intricate. Trade can affect nutrition through many direct and indirect pathways and complex mechanisms.
Trade is an accelerator of the nutrition transition. Its effects on food availability, dietary patterns and resulting nutritional outcomes can be widely heterogeneous across countries, population groups and individuals.
Trade’s effects can vary across countries both in direction and magnitude, depending on a country’s position on the development path, the size and structure of its economy and its agricultural sector, income per capita, demographic characteristics, and the national policy environment. This, and the multi-causal nature of all forms of malnutrition renders the relationship between trade and nutrition outcomes ambiguous and challenging to identify and measure empirically. For example, analysis suggests that openness to trade reduces stunting in children under five years of age at all levels of development. The effects of trade on overweight and obesity appear to be highly context specific. In import-dependent countries with limited domestic food and agricultural production capacity, food trade can be associated with an increasing prevalence of obesity.
Trade can directly impact nutrition through its effects on the availability, diversity and prices of foods. More indirect channels in which trade affects nutrition are through its effects on the wider economy.
Opening to food trade allows for more food imports and thus increases the availability of foods for consumption in a country. This can spur economic growth, accelerating the process of structural transformation, as food imports allow the workforce initially bound in agriculture to be freed-up and to migrate to more productive non-farm sectors.
Trade effects on the diversity of food supply
Natural resources necessary for food production such as land and water are unevenly distributed across countries and climatic conditions vary widely. Some countries can produce only a small range of products, while others possess abundant natural resources and produce a large variety of foods. For example, China, one of the largest countries in the world by area, produced around 320 different items in 2020, as compared with Kiribati, a small island developing state, that produced only 15 different terrestrial food items.
By participating in global food markets, most countries in the world would export foods that they can produce in abundance and import foods that can be more efficiently produced in other countries. At the country level, trade increases the overall diversity of foods available all-year-round. Small countries that face significant agroclimatic and natural resource constraints in food production achieve high levels of diversity through trade. Since not every country has a well-developed food processing industry, similar trade impacts can be found for diversity in processed foods.
On average, trade increases the diversity of foods available for consumption nearly twofold. At the same time, countries import around three times as many different processed and ultra-processed foods as they produce.
Openness to trade promotes specialization in the production of some foods, which, given natural resource endowments and the structure of the farm sector, can be produced at relatively lower costs, strengthening the competitiveness in global food markets. Net-importing countries can achieve a higher diversity of food supplies relative to export-oriented countries that experienced fast growth in their agricultural exports in the last decades.
Trade and the nutrient gap
Globally, current food production provides an adequate supply of most nutrients. Nevertheless, many countries cannot produce a wide range of foods in sufficient quantities to meet their population’s average nutrient requirements, and gaps in nutrient supply have been identified for several micronutrients in many countries, for example, for vitamin A and calcium. Trade can be an important contributor to bridging nutrient supply gaps. Food imports are critical for many countries to meet the dietary needs of their populations to maintain the health and nutritional well-being of all people. With the increase in food trade, there has been a corresponding rise in the trade of nutrients.
Between 2010 and 2020 the expansion of trade helped increase the average supply per capita of micronutrients across countries.
For example, during this period, the per capita trade of the B-vitamins riboflavin and thiamine and the minerals calcium and zinc increased by around 40 percent. The adequacy of a nutrient supply is affected by many factors such as natural resource endowments, climate and population density. Although the adequacy of the nutrient supply can be high in countries that are relatively less integrated in global markets, it is always high at elevated levels of trade openness.
Trade impacts on food prices
Food prices are an important pathway through which trade affects diets and ultimately nutrition. Within a country, imports can increase food availability and can lower domestic food prices. This can result in gains for consumers, for whom access to more diverse foods is improved.
Trade openness can affect the relative prices of different foods, which, in turn, can influence household food consumption and dietary patterns but this effect will depend on the intensity of trade. Foods that are produced and transported in bulk and can be stored for extended periods of time such as staple foods are traded more intensively than foods that require more resources for transportation such as fruits and vegetables.
Trade can help narrow the differences among prices of similar foods across countries, depending on how intensively these foods are traded. While trade has a significant effect on staple food prices, its impact on the prices of fruits and vegetables is small, and depends on the income levels of the countries.
Indeed, around 50 percent of the cheapest foods that are included in the Food and Agriculture Organization of the United Nation’s (FAO) cost and affordability of a healthy diet index tend to be domestically sourced and not intensively traded; therefore, the direct impact of trade on their prices may be limited. Nevertheless, trade policies such as import tariffs do not appear to have a disproportionate effect on different foods.
On average, lower import tariffs are associated with lower food prices, whether the foods are included in the healthy diet basket or not.
Across countries lower import tariffs can result, on average, in a lower food price level and improve access to food. This relationship is not driven only by lower prices of foods of high energy density and minimal nutritional value but by all foods.
Does trade contribute to obesity?
Over the past decades, there has been increasing focus on obesity in global guidance and national policies in many countries, considering the political, economic, cultural and physical factors that would give rise to obesogenic environments. Nutrition experts point to a positive relationship between high consumption of ultra-processed foods of high energy density and, in some instances, low nutrient content and obesity. Ultra-processed foods can contain large amounts of free sugars and saturated fats, which can contribute to a high energy intake.
Income effects on the demand for food imports depend on the extent of processing. Processed and ultra-processed food imports respond strongly to income changes relative to unprocessed and minimally processed foods.
A 10 percent increase in income results in an 11 percent increase in the demand for imports of ultra-processed foods and a 7 percent increase in the demand for imports of unprocessed and minimally processed foods.
This is in line with the concept of nutrition transition, where increases in income can result in higher consumption of ultra-processed foods, including foods high in fats, sugars and/or salt.
Although, in 2021, the share of ultra-processed foods in total calories traded globally amounted to 7 percent, in the region of Oceania, which includes the Pacific Small Island Developing States with high levels of obesity, this share was significantly higher at 23 percent. For these islands, their geographical location results in high trade costs, constraining trade especially for fresh and perishable foods, which are relatively more expensive to transport than other foods.
The debate on whether trade promotes the availability of ultra-processed foods, contributing to obesity in the Pacific islands and other regions, also focuses on the role of trade liberalization and regional trade agreements. Modern and deeper regional trade agreements include provisions for deeper cooperation in regulation and standards to promote trade among their signatories and foresee a harmonization of sanitary and phytosanitary (SPS) measures and technical barriers to trade (TBT) or provide for the mutual recognition of domestic standards. An analysis carried out for this report suggests that the depth of regional trade agreements (RTAs) in terms of SPS and TBT provisions affects the demand for food in different ways depending on the extent of processing.
Deep regional trade agreements with a focus on sanitary and phytosanitary measures and technical barriers to trade could facilitate imports of ultra-processed foods.
For example, RTAs with a high number of SPS provisions tend to facilitate imports of ultra-processed foods relative to other foods. TBT measures, including nutrition labelling, may affect import demand, leading to a lower expansion of trade in ultra-processed foods relative to the other processing levels of foods. This can have implications for trade policymakers who negotiate RTAs that are increasingly found in the spotlight of the public discourse surrounding nutrition.
Trade policies and nutrition measures: Policy coherence
Agricultural policies aim at ensuring food security sustainably and maintaining a level of farm income that keeps pace with the income trends in other economic sectors. Both domestic support and trade policy instruments are subject to the WTO rules and disciplines. Central to WTO agreements is the principle of non-discrimination, aimed at ensuring the fair and equitable treatment of all trade partners. This prohibits discrimination between like products of different foreign origins, as well as between like products of foreign and domestic origin.
However, there are concerns that WTO rules, as well as regional trade agreements, impose potential constraints on the policy space available for improving nutrition and enabling healthy diets, that is the ability of a government to pursue food and nutrition policies to achieve its own national goals.
Some countries use trade policy to address nutrition objectives. For example, in 2012, Fiji reduced tariffs on fruits and vegetables not grown domestically from 32 percent to 5 percent to explicitly promote healthier diets. In other instances, the use of trade policy instruments to improve nutrition has raised concerns about the principle of discrimination. For example, Samoa removed an import ban on turkey tails – an inexpensive meat cut with a high fat content – as part of their accession to WTO, largely due to concerns that it did not address other similar foods with high-fat content, and replaced the import ban with a tax measure.
World Trade Organization rules do not constrain the policy space of countries to pursue nutrition objectives, but they influence the choice of policy instruments due to the principle of non-discrimination.
For example, policy instruments such as excise taxes apply to both imported and domestically produced foods and beverages and can be effective in addressing nutrition objectives. Between 2017 and 2019, the percentage of World Health Organization (WHO) members implementing taxes on sugar-sweetened drinks rose from 23 percent to 38 percent.
Food labelling is one of the primary means of communication among actors along the value chain from the producer to the consumer. Nutrition labelling conveys the nutritional characteristics and attributes of foods to consumers, enabling them to make informed food choices.
In 2004, the World Health Organization proposed front-of-package nutrition labelling as a policy measure to improve diet and health.
A summary of key nutritional aspects and characteristics of food products can be conveyed in the form of an easy-to-understand label on the front of the package displaying logos, warning labels, symbols, icons, multiple traffic lights, or scores to lead to better consumer understanding and to support healthier food purchases.
Front-of-package nutrition labelling (FoPLs) is classified as TBT and thus are subject to the WTO Agreement on Technical Barriers to Trade. WTO members can request justifications for another member’s FoPL if it significantly impacts trade, whether it is effective in addressing the relevant nutritional objective and whether there are alternative measures that could achieve the same result. At the WTO Committee on Technical Barriers to Trade, between 1995 and 2023, 77 specific trade concerns were raised by 37 countries pertaining to regulations on food and beverage products, out of which 52 were related to labelling requirements.
The discussions among countries at the World Trade Organization Committee on Technical Barriers to Trade may influence or could shape a country’s nutrition policies related to food labelling so that their potential to support healthier food choices is proportional to their impact on trade.
Understanding the interface between trade and nutrition policies can inform the design of policies that are effective and consistent with WTO rules. At the national level, there is scope to strengthen policy coherence between trade and nutrition, for example, by establishing mechanisms to enable engagement between the health and trade sectors in the negotiation and implementation of trade agreements.
Building capacities among trade policymakers and nutrition officials fosters policy coherence between trade and nutrition. Stakeholder engagement and transparency in negotiating trade agreements are critical to making trade improve nutrition.
For deep trade agreements, policy coherence between trade and nutrition objectives, as well as stakeholder engagement and transparency, are critical in making the negotiations more inclusive. Promoting the engagement of all stakeholders, especially those related to nutrition and public health, and increasing transparency in negotiations for deeper trade agreements can ensure that increased trade will address food security, economic and nutrition objectives.
The development and clear communication of nutrition guidelines, together with a mandate to address nutrition-related health concerns, can support trade policy action for nutrition. Strengthening transparency through forums for government, non-governmental stakeholders, civil society and the knowledge community to discuss nutrition issues arising from trade is also important in assessing the potential impact of trade agreements on nutrition.
