Globalization are powerful factors that could importantly to reducing poverty, stimulating growth in developing countries and sustainable development. Which thought is rights[r]
(1)1
LECTURE
(2)1 Globalization & the
transformation of food systems
Globalization
Rapid growth of world trade,
Internationalization of production by
multinational corporations and
Declining information & communications
(3)Advance of retail chains: top 10 world 2007
(4)Nestlé global
Drinks, ice cream, baby food, bottled water,
breakfast cereals, coffee, chocolate, culinary, dairy
2010
Sales: 109.7 billions CHF
Net profit: 34.2 billions CHF (31.2% of sales)
2011
Sales: 83.6 billions CHF
Net profit: 12.5 billions CHF (31.2% of sales)
(5)1 Globalization & the
transformation of food systems
Three aspects for potential trade
benefits for agriculture
possibility of direct increased exposure of
agriculture to international competition,
indirect effects of increased international
trade on the growth of non-agricultural
sectors changing the domestic demand for agricultural goods
lifestyle changes including diets, particularly
among the urban middle class
(6)1 Globalization & the
transformation of food systems
Rising food imports
Increased developing country imports of
cereals and livestock products: increased demand & low competitiveness of domestic agriculture
Growing food imports: inflows of lower
priced food from subsidised agriculture in developed countries
Rapid urbanisation, growth of mega-cities
(7)1 Globalization & the
transformation of food systems
Vertical integration of the food supply chain
urban food demand accompanied by consolidation in
the retail sector dominance of supermarkets
substantial organisational and institutional changes
throughout the food marketing chain
private grades and standards for food quality and
safety applied
adoption of contracts between buyers and sellers
existence of small traders and small business, central
‘spot’ food markets and neighbourhood stores is threaten
(8)Alternative forms of vertical
(9)9 2 Context of developing
countries
Development policy has strongly emphasized rapid
industrialization
Promoting domestic industries while distorting price
incentives against agriculture diminishes the
positive effects of public investments in agricultural research, extension, rural infrastructure, and
marketing infrastructure:
Lower agricultural production as compared to under a more neutral structure
Reducing the real purchasing power of rural population
(10)10 2 Context of developing
countries
Declination in the share of agriculture in GDP
As the natural result of economic development Emphasizing rapid industrialization by means of
import substitution
Promoting import-substitution industries by high
tariffs and quantitative import restrictions
Providing foreign currency for imports of capital
goods and related materials available at highly favorable terms
(11)11 2 Context of developing
countries
Applied policies
No subsidies for agricultural producers
Farm products are subject to export tax through
pricing policy of state marketing board (e.g rice VN) The urban bias policies tend to keep food price down
and also keep wages down to help industrial
enterprises to recruit labor from agricultural at a cost
Consequences
Agri producers have to pay high prices for industrial inputs due to protection of domestic industries; more fluctuation of imported inputs while received little
(12)3 Context of rich countries
Modern agriculture production with advanced
capital-intensive technologies and high yielding
Economy of scale: big-scale farms; farm enterprises Surplus of agricultural products
High production costs compared to poor countries
due to high labor cost
Dominance of international trade of agricultural
inputs (e.g fertilizers, pesticides and energy) and various high-value products (e.g vegetables,
(13)13
3 Context of rich countries
Policies:
Heavily subsidy to domestic farms: rural bias
policies to equalize incomes of rural people compared to urban
Apply technical barrier to protect import
agricultural products (SPS, food safety, market regulations)
Encourage exports of advanced inputs as hybrid
seeds, pesticide ingredients and cheap
(14)14 4 Globalization and its impacts
Two schools of thought to impacts of
globalization on sustainable development:
1 Globalization has the negative impacts on
sustainable development, poverty, and welfare of poor countries and the weaker groups in
society
2 Globalization are powerful factors that could importantly to reducing poverty, stimulating growth in developing countries and sustainable development
Which thought is rights? Experiences from
(15)15 4.1 Globalization and its impacts for developing countries
Benefits Obstacles
Access to international
markets Rich countries subsidy and absence of WTO deal
Specialization Risk minimization, high input
costs, quality problems, infrastructure bottlenecks
Economies of scale Transaction costs of
consolidation, credit markets Capital inflows and
technological changes Small farmers excluded from supply chains Lower transport and
(16)16
4.2 Subsidies of rich countries
Switzerland 68%
Japan 56%
European Union 33%
Canada 21%
United States 18%
Mexico 17%
Australia 4%
New Zealand 3%
30 Countries Overall 30%
Producer support as share of gross receipts, 2004
(17)17 4.2 Subsidies of rich countries
Effect of OECD subsidies on world prices
Source: World Bank, Global Economic Prospects 2002
Rice 33 - 50 %
Sugar 20 – 40 %
Dairy Products 20 – 40 %
Cotton 10 – 20 %
Peanuts 10 – 20 %
Global prices for crops like cotton, soybean, sugar, dairy, wheat and maize are suppressed by rich country
subsidies and resulting exports from rich
(18)(19)19 4.3 Responses from developing
countries to globalization
Re-allocation of domestic resources for
agriculture towards sub-sectors having
economy of scale and comparative advantages
Enhance specialized production of high-value
added products to export
Diversity in food policies among net food
(20)20 4.4 Opportunity of developing
countries to globalization
Global palm oil production
0 5 10 15 20 25 30 35 40
1980 1985 1990 1995 2000 2005 2006
mi ll ion ton n es Other countries Indonesia Malaysia
(21)21 4.4 Opportunity of developing
countries to globalization
Southeast Asia: Exports of high value added commodities
0 100 200 300 400 500 600 700 800
1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001
0 1000 2000 3000 4000 5000 6000 7000 8000 9000
Total agricultural exports Dairy Fruit and veg Meat (right axis)
(22)22 4.4 Opportunity of developing
countries to globalization
Latin America: Exports of high value added commodities
0 200 400 600 800 1000 1200
1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001
Total agricultural exports Dairy
Fruit and veg Meat
(23)23 4.4 Opportunity of developing
countries to globalization
Asia and Africa: Fish and shellfish exports, constant 2000 USD
0 1000 2000 3000 4000 5000 6000 7000 8000
1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
Africa Asia
(24)4.5 Difficulties of developing countries
Fluctuation of imported input prices
Less competition in international market:
Distorted international prices
Technical barriers posed by rich import countries (SPS, food safety, market regulations)
Anti-dumping mechanism of rich countries
Mis-allocation of domestic resources to export cash
crops than producing staple food
Collapse of some agricultural sub-sectors due to low
(25)25 5 Problems of rural development Inability or unwillingness of producers to
accept the risks associated with specialization
Lack of technology and infrastructure required
for specialization
Lack of capital to upgrade technology and
infrastructure
Lack of market information and cannot keep
pace with shifts in demand
(26)6 Question remained
Globalization and small farms’ survival? How to restructure rural economy?
Make use of FDI capital flows in agriculture and
retail markets to modernize agricultural sub-sectors
Contract farming to reduce transaction costs and
therefore farmgate prices
Creating producer associations among small
farmers can also improve bargaining power in
(27)27
Agribusiness?
Investors in food processing companies assist
farms to access necessary inputs and to invest in better technology through different
assistance programs
Agribusiness companies sell farm inputs to
farms and use unconventional forms of
(28)Agribusiness?
Interlining markets: landlords act as
intermediary between outside loan market and their workers/tenants or establishing trader
and farmers relationships
These forms of contracts are very important to
(29)29 7 Some conclusions
1 Globalization forces have played an important role in transitional countries’ agri development and rural livelihoods (multi effects and interactions)
2 Micro-economic effects: foreign investments as
initiators of technological innovations, restructuring
farms, inducing vertical coordination efficiency gains
3 Competition reducing monopoly
4 Marginalization of small-scale production
5 Dependence on food multi-national corporations and giant retailers
(30)8 Policy implication
1 Right policy towards globalization: making use of potential benefits and limit bad side-effects
2 Enhance food security and reduce poverty
3 Re-orienting agricultural research and development priorities
4 Creating an enabling environment for smallholder transformation
Appropriate institution for small-scale farms: modern
cooperatives vertical-linked with agro value chains and agri-business
Rural infrastructure investment
(31)31 8 Policy implication
5 Accept establish of large-scale farms or specialized agro-enterprises
6 Enabling income and livelihood diversification
7 Establishing safety standards and regulations
8 Establish value chains and policies for the whole value chains/clusters that have high competitiveness
9 Allowing foreign investments to learn technological innovations and restructuring farms
10.Develop domestic market for processed agro-products
(32)References
Pingali, Prahu, 2006 Agricultural Growth and Economic Development: A View through the Globalization Lens Presidential Address to the 26th
International Conference of Agricultural Economists, Gold Coast, Australia, 12 – 18th August, 2006
Swinnen, Johan 2004 “The Impact of Globalization on Agricultural Development and Rural Poverty in Transition Countries.” Proceeding from Agricultural Development and Rural Poverty under Globalization: Asymmetric Processes and Differentiated Outcomes Florence, Italy, September – 11
Bautista and Valdez 1993 “The Relevance of Trade and